Executive Takeaways
■ The appointment of audit-firm alumni to a client’s audit committee can be a double-edged sword for investors in terms of audit quality. ■ Alumni appear to favor their former audit firm, allowing it to provide both audit and consulting services. ■ When alumni on audit committees approve more consulting from their former audit firm, audit quality is impaired. ■ The intricate relationship between alumni and their former audit firm may require scrutiny from various stakeholders.
Divesh S. Sharma, Professor of Accounting
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