Auditor Tenure and Shareholder Ratification of the Auditor

Legislators and regulators have expressed concerns about the effect of long auditor tenure on audit quality. There is little direct evidence on investors' perceptions about long auditor tenure. In this paper, we use shareholder votes on auditor ratification as a proxy for investor perceptions about audit quality. We find, using data from 635 firms during 2006, that shareholder votes against (or abstaining from) auditor ratification are positively correlated with auditor tenure. The results suggest that shareholders view long auditor tenure as adversely affecting audit quality, and provide an empirical basis for arguments related to the impact of long auditor tenures on shareholders' perceptions of audit quality. [PUBLICATION ABSTRACT]