This paper examines the association between the length of the cooling-off period and audit quality: (1) when partners rotate back and (2) during the cooling-off period, ahead of an extension to the minimum cooling-off period requirement in Australia. Using multiple measures of audit quality, we find some evidence of a positive association between the cooling-off period length and audit quality when partners rotate back, yet evidence of a negative association between the two, during the cooling-off period. We also find that auditor and client characteristics-such as partner busyness, client knowledge, geographic proximity, and client importance-play important roles in determining the cooling-off period length and whether a partner rotates back onto a client. Overall, we provide timely evidence that extending the cooling-off period only marginally enhances audit quality when a partner rotates back onto a client, and evidence of an unintended consequence of this policy during the cooling-off period.
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Research Article| October 01 2021
Does the Length of the Cooling-off Period Affect Audit Quality?
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Rebecca Mattocks, Ting-Chiao Huang, Robyn Moroney, Ashna Lata Prasad; Does the Length of the Cooling-off Period Affect Audit Quality?. AUDITING: A Journal of Practice & Theory 2021; doi: https://doi.org/10.2308/AJPT-19-091
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