Top Management Team Stability and the Quality of Interaction with the Independent Auditor

Authors

  • Akram Afsay * Department of Accounting, Farabi Campus, University of Tehran, Qom, Iran. https://orcid.org/0000-0003-0551-9197
  • Hassan Shafikhani Department of Accounting, Farabi Campus, University of Tehran, Qom, Iran.

https://doi.org/10.22105/aaa.v2i4.85

Abstract

This article examines the role of senior management team stability in the quality of engagement with the independent auditor and analyzes its importance in promoting professional trust, reducing audit risk, and strengthening professional judgment. Research shows that management stability, by creating mutual understanding and consistent procedures, enables effective interaction and transparent information exchange between management and the auditor. Long-term interactions provide opportunities to improve efficiency and reduce uncertainty, but in the absence of appropriate oversight, they may lead to overreliance and threats to auditor independence. A concentrated ownership structure, institutional interference, and the complexity of the business environment further increase the importance of management stability and oversight frameworks. Concentrated ownership structure, institutional interference, and the complexity of the business environment double the importance of management stability and oversight frameworks. Findings suggest that combining senior management team stability with effective corporate governance mechanisms and internal controls maximizes opportunities for professional engagement with the auditor and minimizes potential threats to it. This article suggests that policymakers and managers should pay special attention to strengthening management stability, maintaining auditor independence, and improving the quality of engagement in order to enhance transparency, investor confidence, and audit effectiveness in Iran.

Keywords:

Senior management team stability, Audit, Effective engagement

References

  1. [1] Hambrick, D. C., & Mason, P. A. (1984). Upper echelons: The organization as a reflection of its top managers. Academy of management review, 9(2), 193–206. https://doi.org/10.5465/amr.1984.4277628
  2. [2] Finkelstein, S., Hambrick, D. C., & Cannella, A. A. (2009). Strategic leadership: Theory and research on executives, top management teams, and boards. Oxford University Press. https://doi.org/10.1093/acprof:oso/9780195162073.001.0001
  3. [3] Barker III, V. L., & Mueller, G. C. (2002). CEO characteristics and firm R&D spending. Management science, 48(6), 782–801. https://doi.org/10.1287/mnsc.48.6.782.187
  4. [4] Nelson, M. W. (2009). A model and literature review of professional skepticism in auditing. Auditing: a journal of practice & theory, 28(2), 1–34. https://doi.org/10.2308/aud.2009.28.2.1
  5. [5] DeAngelo, L. E. (1981). Auditor independence,‘low balling’, and disclosure regulation. Journal of accounting and economics, 3(2), 113–127. https://doi.org/10.1016/0165-4101(81)90009-4
  6. [6] La Porta, R., Lopez-de-Silanes, F., & Shleifer, A. (1999). Corporate ownership around the world. The journal of finance, 54(2), 471–517. https://doi.org/10.1111/0022-1082.00115
  7. [7] Jensen, M. C., & Meckling, W. H. (2019). Theory of the firm: Managerial behavior, agency costs and ownership structure. In Corporate governance (pp. 77–132). Gower. https://doi.org/10.4324/9781315191157
  8. [8] Bazerman, M. H., Loewenstein, G., Moore, D. A., & others. (2002). Why good accountants do bad audits. Harvard business review, 80(11), 96–103. https://www.andrew.cmu.edu/user/gl20/GeorgeLoewenstein/Papers_files/pdf/WhyGoodAccountants.pdf
  9. [9] Miller, D. (1991). Stale in the saddle: CEO tenure and the match between organization and environment. Management science, 37(1), 34–52. https://doi.org/10.1287/mnsc.37.1.34
  10. [10] Meckling, W. H., & Jensen, M. C. (1976). Theory of the Firm. Managerial behavior, agency costs and ownership structure, 3(4), 305–360. https://doi.org/10.1007/978-94-009-9257-3_8%0A%0A
  11. [11] Francis, J. R. (2004). What do we know about audit quality? The british accounting review, 36(4), 345–368. https://doi.org/10.1016/j.bar.2004.09.003
  12. [12] DeZoort, F. T., Hermanson, D. R., Archambeault, D. S., & Reed, S. A. (2002). Audit committee effectiveness: A synthesis of the empirical audit committee literature. Audit committee effectiveness: a synthesis of the empirical audit committee literature, 21, 38-75. https://digitalcommons.kennesaw.edu/cgi/viewcontent.cgi?article=2496&context=facpubs
  13. [13] DeAngelo, L. E. (1981). Auditor size and audit quality. Journal of accounting and economics, 3(3), 183–199. https://doi.org/10.1016/0165-4101(81)90002-1
  14. [14] Gibbins, M., Salterio, S., & Webb, A. (2001). Evidence about auditor--client management negotiation concerning client’s financial reporting. Journal of accounting research, 39(3), 535–563. https://doi.org/10.1111/1475-679X.00027
  15. [15] Bazerman, M. H., Morgan, K. P., & Loewenstein, G. F. (1997). The Impossibility of Auditor Independence. Sloan management review, 38(4), 89–95. https://www.hbs.edu/faculty/Pages/item.aspx?num=4279
  16. [16] Carcello, J. V, & Nagy, A. L. (2004). Audit firm tenure and fraudulent financial reporting. Auditing: a journal of practice & theory, 23(2), 55–69. https://doi.org/10.2308/aud.2004.23.2.55
  17. [17] Cohen, J., Krishnamoorthy, G., & Wright, A. (2010). Corporate governance in the post-Sarbanes-Oxley era: Auditors’ experiences. Contemporary accounting research, 27(3), 751–786. https://doi.org/10.1111/j.1911-3846.2010.01026.x
  18. [18] Finkelstein, S., & Hambrick, D. C. (1990). Top-management-team tenure and organizational outcomes: The moderating role of managerial discretion. Administrative science quarterly, 484–503. https://doi.org/10.2307/2393314
  19. [19] Hurtt, R. K. (2010). Development of a scale to measure professional skepticism. Auditing: a journal of practice & theory, 29(1), 149–171. https://doi.org/10.2308/aud.2010.29.1.149
  20. [20] Davis, L., Soo, B., & Trompeter, G. (2009). Auditor tenure and the ability to meet or beat earnings forecasts. Contemporary accounting research, 26(2), 517–548. doi:10.1506/car.26.2.8%0A
  21. [21] Fama, E. F., & Jensen, M. C. (1983). Separation of ownership and control. The journal of law and economics, 26(2), 301–325. http://www.jstor.org/stable/725104?origin=JSTOR-pdf
  22. [22] Nelson, M., & Tan, H. T. (2005). Judgment and decision making research in auditing: A task, person, and interpersonal interaction perspective. Auditing: a journal of practice & theory, 24(s-1), 41–71. https://doi.org/10.2308/aud.2005.24.s-1.41

Downloads

Published

2025-12-23

Issue

Vol. 2 No. 4 (2025): Accounting and Auditing with Applications

Section

Articles

License

Copyright (c) 2025 Accounting and Auditing with Applications

Creative Commons License

This work is licensed under a Creative Commons Attribution 4.0 International License.

How to Cite

Afsay, A. ., & Shafikhani, H. . (2025). Top Management Team Stability and the Quality of Interaction with the Independent Auditor. Accounting and Auditing With Applications , 2(4), 326-337. https://doi.org/10.22105/aaa.v2i4.85

Similar Articles

21-30 of 34

You may also start an advanced similarity search for this article.