The joint effects of partner rotation and allocation of audit hours on audit quality

Abstract

Purpose

This study aims to examine the effects of allocation of audit hours to year-round audits and audit partners on audit quality when a new partner is appointed.

Design/methodology/approach

Using proprietary data of partners’ names and audit hours in the year-round context, the authors build a model testing input factors related to audit production and new partner assignment in 1,209 Korean listed firms during the period of 2015–2018.

Findings

The results show that in the partner rotation, the more audit hours spent, the more audit hours are allocated to the year-round audit, or more nonpartners’ audit hours are allocated to the year-round audit, the higher the audit quality. Subsample analyses show that these findings are concentrated in firms with longer audit tenure or low audit risk.

Research limitations/implications

The findings may provide regulatory authorities with practical guidelines concerning partner rotation and how to allocate audit hours to different audit stages and ranks (partner vs staff).

Originality/value

To the best of the authors’ knowledge, this study provides the first evidence of the joint effects of partner rotation and audit hour allocation on audit quality.

Citation

Kang, M., Kim, S. and Lee, H.-Y. (2023), "The joint effects of partner rotation and allocation of audit hours on audit quality", Managerial Auditing Journal, Vol. 38 No. 6, pp. 947-971. https://doi.org/10.1108/MAJ-04-2023-3892