Abstract
This paper considers whether the association between partner rotation and audit fees varies based on whether the partner is rotated before the interim review or annual report audit. Consistent with prior literature, there is some evidence of higher fees in the year of rotation, but we find this effect is driven by partner rotations that occur before the interim review, which are 7.14% higher on average. We argue that rotations before the annual report audit are less likely to be planned, and thus audit firms cannot pass on increased costs due to a weaker bargaining position. Supporting evidence is provided, as results only persist when client bargaining power is low, and in contrast there are lower fees for rotations that occur before the annual report audit when client bargaining power is high.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
