An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

David S. Jenkins
University of Delaware

Uma Velury
University of Delaware

Abstract: In this study, we examine the relation between auditor tenure and the reporting of conservative earnings. Using the Basu (1997) models as a basis, we document evidence showing a positive association between the conservatism contained in reported earnings and the length of the auditor-client relationship. We further document an increase in conservatism between short and medium tenure periods that does not deteriorate over long tenure periods. Collectively, the results imply lower conservatism for short auditor tenure periods, which suggests that mandating auditor rotation may have an adverse affect on the conservatism contained in reported earnings.

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