Future Earnings Response Coefficient with Audit Tenure

• Main Authors: Zhi-Chi Chen, 陳志啟
• Other Authors: Nan-Ting Kuo
• Format: Others
• Language: zh-TW
• Published: 2015
• Online Access: http://ndltd.ncl.edu.tw/handle/j73sv5

碩士 === 國立中央大學 === 會計研究所 === 103 === With a view to exploring if audit tenure is informative about future earnings and the perception of stock market on auditor rotation policy, our study examines these issues by investigating the effect of audit tenure on the relationship between current period stock return rates and future earnings. Moreover, by using a sample of listed and OTC companies in Taiwan, where the audit reports are stipulated to reveal two audit partners’ names, we can extent this issue from CPA-firm level to partners level. Our results show that any type of audit tenure (i.e. lead, coordinating audit partners and CPA-firm tenure) enhances the FERC (Future Earnings Response Coefficient) and the CPA-firm tenure is the most significant one. Our evidence implies that audit tenure is a positive signal for investors. That is, the longer the audit tenure is, the higher the future earnings are valued, which is entirely opposed to the auditor rotation policy