The Effect of Auditor Tenure and Industry Specialization on Cost of Debt Capital

• Main Author: 謝承儒
• Other Authors: 陳瑞斌
• Format: Others
• Language: zh-TW
• Published: 2013
• Online Access: http://ndltd.ncl.edu.tw/handle/14355147079771990625

碩士 === 國立彰化師範大學 === 會計學系 === 101 === The purpose of this study is to examine the influence of auditor tenure , industry specialization on cost of debt capital and evaluate whether seven-year auditor partner rotation requirement specified in the Auditing Standard Bulletin No. 46 is needed. This research chooses the listed companies which contain 4068 observations from 2005 to 2011 and uses Ordinary Least Squares regression method to examine the relationship between auditor tenure , industry specialization and cost of debt capital. The results are summarized as the following : 1. It is significantly negative association between auditor tenure and cost of debt capital , which means that the longer the auditor partner tenure , the more understanding for the customers , as a result that the auditors of a customer with a more extensive audit experience , can effectively detect errors and fraud of the financial information to enhance the transparency and reliability of the financial statements , and creditors are willing to reduce the required rate of return , thus also reduce the cost of debt capital by the company. 2. It is significantly negative association between auditor industry specialization and cost of debt capital , which means that the auditors with industry specialization that have a wealth of industry knowledge and practices for a particular industry , and have more abilities to detect fraud of the financial statements. Thus , this indicates that auditor industry specialization can reduce information asymmetry and agents’ conflict of interest effectively , then creditors are willing to reduce the required rate of return , thus also reduce the cost of debt capital by the company. 3. The longer auditor tenure and the auditor with industry specialization have the greater degree of control rights deviation , reducing the cost of debt capital by the company.