Impact of auditor tenure on audit quality: European evidence

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This study examines the relationship of auditor tenure and audit quality in four European countries, namely Germany, France, Italy and Spain, with the innovative GMM (Generalized Methods of Moments) model during the period from 2005 to 2013.
Two GMM methods are used with two alternative definitions of crisis – the main and the robustness method. The results agree regardless of the fact that some of the control variables are excluded in the robustness test.
The results support the finding that in Spain, there is an impact of auditors’ long-term tenure on discretionary accruals, affecting auditors’ quality and independence indirectly. In addition, the crisis affected Germany and France as far as the change in negative and positive values of GDP is concerned. In this respect, the crisis affected the above two countries when the years before and after the crisis are considered as a robustness check. The results contain important implications for accountant regulators and policy makers.

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    • Table 1. Descriptive statistics for Germany, France, Italy and Spain outside the financial crisis for change of GDP > 0
    • Table 2. Descriptive Statistics for Germany, France, Italy and Spain during the financial crisis for change of GDP < 0
    • Table 3. GMM results for Germany, France, Italy and Spain
    • Table 4. GMM robustness results for Germany, France, Italy and Spain