The aim of this study is to examine the duration of the auditor’s relationship with a client and factors that effect audit firm tenure. The duration of the auditor and client relationship has been cited as being a possible factor lading to a loss of auditor independence. In fact, one of the threats to auditor independence is the “familiarity threat” (MIA By-Laws B-1.9).This occurs as a result of having a close relationship with an assurance client, its directors, officers or employees, whereby the assurance team becomes too sympathetic to the client’s interest. In an examination of 500 public listed companies from 1996 to 2004, the mean duration of audit tenure was found to be more than 5 years. Also, there were only 42 auditor changes during this period, which is equivalent to a per annum rate of change of 0.7 per cent. The rate of change was relatively slow and if audits were changed. The low number of Changes suggests that Malaysian companies tend to retain their auditors. The type of change that frequently took place from a Big Four to a Non-Big Four and these changes took place during the period 2002 to 2004. Variable that were found to affect audit tenure were client size, gearing, liquidity, and change in sales. However, variable such as profitability and change in total assets were not affected by audit tenure.

Research Team:
•  Wan Azmimi Wan Mohamed
•  Aida Hazlin Ismail
•  Sharifah Nazatul Faiza Syed Mustapha Nazri
•  Hilwani Hariri

Insitute:
UITM