The Moderating Role of Governance Structures on the Impact of Duration of CEO Service on Quality of Audits: Evidence from the Iraq Stock Exchange

Abstract

This study aims to explore the role of corporate governance in moderating the effects of financial manager tenure and auditing firm tenure on audit quality in organizations listed on the Iraqi Stock Exchange. The analysis includes all companies and banks listed on the exchange during the period from 2016 to 2023. Employing a multivariate regression model in EViews software, the research provides practical insights into the interplay of governance structures, leadership tenure, and audit quality. The findings reveal a notable association between extended CEO tenure and the engagement of lower-quality audit firms, often linked to practices like discretionary accruals. However, in banks with strong corporate governance frameworks, this negative relationship is mitigated, indicating that governance mechanisms can buffer against potential declines in audit quality. Interestingly, this moderating effect is not observed in non-banking companies. These results underscore the need for regulators to consider additional institutional factors, such as the dynamics between audit firms and client personnel, when designing policies on audit firm rotation. Strengthening corporate governance practices, particularly in non-banking sectors, may enhance audit quality and reduce risks associated with long-tenured leadership and audit firm relationships.