PATRÍCIA ROMUALDO DE ALMEIDA
Doctorate - Prospection about optimal term for audit firm rotation in Brazil
Local: na sala 215, FEA-5
Adviser: Prof. Dr. Luiz Nelson Guedes de Carvalho
Comission: Profs. Drs. Guillermo Oscar Braunbeck, Lúcio Rodrigues Capelletto, Poueri do Carmo Mário e Fábio Moraes da Costa
The aim of this work is to investigate whether there is an “optimal” period for the mandatory audit firm rotation in Brazil. Firstly, evidence was sought through a questionnaire to support the development of a model of audit quality as a function of the audit tenure, considering separately the effects of audit tenure on the audit quality components, competence and independence, according to DeAngelo’s (1981b) concept. Based on a quadratic model, which consists of a simplification of the model originally proposed, an empirical application was made with data from Brazilian companies, listed on Bovespa, for the period from 1998 to 2016. The results suggest that it is possible to estimate an “optimal” audit tenure period for the mandatory audit firm rotation in Brazil around 5.7 years. Additional tests were performed to give robustness to the results, indicating that the “optimal” period would be around 6 and 8.8 years. These results indicate, therefore, that the term currently used by the CVM (5 years for companies that do not have statutory audit committee and 10 years for those that have) is compatible with the estimated terms to establish the highest possible level of the average audit quality, and may be slightly extended without incurring in greater losses in terms of maximizing the average audit quality.
*Abstract provided by the author