This paper aims to examine how compensation committees perceive audit quality as indicated by audit firm tenure. Using the contracting weight attached to earnings and cash flows in chief executive officer (CEO) compensation as proxy for the compensation committee’s perception of audit quality, the study examines whether compensation committees perceive performance metric informativeness as being affected by auditor tenure.,The paper regresses CEO cash compensation on accounting-based performance metrics and on interactions between auditor tenure and accounting-based performance metrics while controlling for other factors previously shown to affect CEO pay. Auditor tenure is measured using continuous and dichotomous variables.,Auditor tenure is associated with a reduced (positive) weight on earnings (operating cash flows), which suggests lower perceived audit quality as tenure lengthens consistent with the auditor closeness argument. This relation is asymmetric, i.e. the negative effect of longer auditor tenure on incentive contracting is more pronounced for positive earnings. The results are robust to using CEO total compensation as the compensation measure, as well as using level and change specifications.,The inability to control for audit partner tenure in assessing the effect of audit firm tenure on incentive contracting and the potential endogeneity between auditor tenure choice and incentive contracting are the main limitations of this study. Given the lack of information on US audit partner tenure, the study could not control for the audit partner tenure issue. However, the study has attempted to mitigate the endogeneity issue by using a Heckman selection model that includes in the first-stage a regression of auditor tenure on various firm, performance measure and CEO-related governance characteristics, based on existing models (Li et al., 2010).,Compensation committees view auditor tenure as an indicator of accounting quality in setting CEO pay. Further, long auditor tenure is perceived as detrimental to financial reporting integrity, particularly when earnings numbers suggest positive managerial performance and innovations.,This study provides empirical evidence that auditor tenure matters in setting executive pay. Further, this study shows evidence on the link between auditor tenure and audit quality from an internal user’s perspective. Prior studies have focused either on external users (investors, creditors) or on the preparer (using measures such as discretionary accruals or meet/beat analysts’ forecasts or forecast guidance).

中文翻译：

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审计公司的任期和感知的审计质量：CEO激励合同的证据

本文旨在研究薪酬委员会如何看待审计公司任期所表明的审计质量。本研究使用首席执行官（CEO）薪酬中收入和现金流量所附的合同权重作为薪酬委员会对审计质量看法的代理，研究了薪酬委员会是否认为绩效指标信息量受审计师任期影响。针对基于会计的绩效指标以及审计师任期与基于会计的绩效指标之间的相互作用的CEO现金报酬，同时控制先前显示出会影响CEO薪酬的其他因素。审计师的任期是使用连续的和二分变量来衡量的。审计师的任期与收益（经营现金流量）的减少（正）权重相关，这表明随着任期的延长，审计质量会降低，这与审计师亲密性的观点一致。这种关系是不对称的，即更长的审计师任期对激励合同的负面影响对于正收益而言更为明显。结果对于使用CEO总薪酬作为薪酬衡量标准以及水平和变更规范是可靠的。无法控制审计伙伴的任期来评估审计公司任期对激励合同的影响以及审计师任期之间的潜在内生性选择和激励契约是这项研究的主要局限。鉴于缺乏有关美国审计合伙人任期的信息，该研究无法控制审计合伙人任期问题。然而，该研究试图通过使用Heckman选择模型来减轻内生性问题，该模型包括在第一阶段基于现有模型对各种公司，绩效指标和与CEO相关的治理特征进行审计师任期的回归（Li等， 2010年），薪酬委员会将审计师任期视为设定CEO薪酬的会计质量指标。此外，长期的审计师任期被认为不利于财务报告的完整性，特别是当收益数字表明积极的管理绩效和创新时。本研究提供了经验证据，证明审计师任期对设定高管薪酬至关重要。此外，本研究从内部用户的角度显示了审计师任期与审计质量之间联系的证据。先前的研究主要针对外部用户（投资者，