SUMMARY The constricted mandatory audit partner rotation rules for U.S. public companies have fueled intense debate among the profession, regulators, and policymakers. This topic remains controversial, but neither side has provided evidence of the consequential benefits and costs of mandatory rotation. While rotation effects on audit quality have been examined, we empirically examine its effects on two audit production costs: audit fees and audit timeliness. We find significantly higher audit fees and significantly longer audit report lags in the period immediately following mandatory audit partner rotation. These effects are more pronounced for non-Big 4 auditors, larger clients, and audit offices that are not industry specialists. Moreover, the audit fee and audit timeliness effects persist in successive audit partner rotations, suggesting that client-specific knowledge gained through longer audit firm engagement does not completely mitigate loss of client-specific knowledge at the partner level. Our findings provide new empirical evidence supporting the profession's arguments that mandatory audit partner rotation is costly to multiple stakeholders, including clients, auditors, and investors. Data Availability: All data are publicly available from sources identified in the text.

SUMMARY: Audit partner rotation has received considerable attention globally and in the U.S. since the Sarbanes-Oxley Act of 2002 accelerated the rotation period from seven to five years and expanded the cooling-off period from two to five years. However, research on the effects of audit partner rotation on financial reporting quality in the U.S. is virtually non-existent, largely due to the absence of publicly available information on audit partners. Using a novel approach to determine audit partner rotation, we investigate the effect of rotation on financial reporting quality in the U.S. We find evidence of lower financial reporting quality following an audit partner change. Specifically, we find lower financial reporting quality during the first two years with a new audit partner relative to the final two years with the outgoing partner. We find the lower financial reporting quality to be more prevalent for larger clients. Further analyses suggest the initial year post-rotation presents audit challenges for Big 4 partners, which persist for at least three years for non-Big 4 partners. Audit challenges also appear greater for city-level non-industry specialist auditors and smaller audit offices. We discuss the implications of our results for regulators, policymakers, and the profession at large.

Purpose The purpose of this paper is to provide initial evidence on the association between environmental initiatives and earnings management.Prior literature documents firms participating in environmental initiatives to report relatively stronger financial performance. Moreover, firms with superior performance have been shown to engage in greater levels of earnings management. A natural question that arises is: to what extent do firms with environmental initiatives engage in earnings management to report better financial performance? Design/methodology/approach The study draws on two theoretical frameworks, external monitoring and internal corporate culture, to predict an inverse association between environmental initiatives and earnings management. We test this prediction using an earnings management regression model, estimating discretionary accruals using the modifiedJones approach. Findings -The study finds that firms with environmental initiatives exhibit lower earnings management proxied by absolute and incomeincreasing total discretionary accruals. We further find pollution prevention and climate related initiatives to help explain this inverse association. Our results imply that firms practicing environmental responsibility report better financial performance most likely due to real economic performance rather than through earnings management techniques. Originality/value This study provides initial evidence on the association between environmental initiatives and earnings management, an area of tremendous value to all stakeholders in a market with increasing interest in corporate environmental performance and its implications.