How auditors adjust audit hours to partner rotation

Purpose This study analyzes how auditors adjust audit hours by stage and rank in response to partner rotation while maintaining audit quality. Design/methodology/approach The sample consists of Korean listed firms on the Korea Stock Exchange (KSE) and Korea Securities Dealers Automated Quotation (KOSDAQ) market for the fiscal year of 2015–2018. We use proprietary data that includes partner names and staged audit hours for firms audited by Big4 audit firms. Findings We find that partner rotation does not affect audit quality but leads to decreases in both audit fees and audit hours. Within the reduced time, auditors cut back on year-round audit hours and allocate more time to year-end audits. Additionally, they reduce the hours of non-registered accountants and increase the involvement of partners. These adjustments help mitigate potential declines in audit quality after partner rotation. We demonstrate how auditors adapt to time constraints and minimize the risk of audit failure. Originality/value This paper shows evidence that partner rotation leads to changes in audit hour allocation by stages and ranks, and the findings enhance our understanding of audit procedures and input factors. The results have important implications for audit practitioners, audit clients, and regulators, as they are concerned with the allocation of audit hours to improve audit quality.