PCAOB recently solicits comments on a 10-year mandatory audit firm rotation for the largest 100 S&P firms. We propose that audit quality is likely to increase with audit firm tenure due to a dominant Learning Effect in earlier years and decrease with audit firm tenure due to a dominant Bonding...

We propose that audit quality is likely to increase in the earlier years due to a Learning Effect and in later years it decreases due to a Bonding Effect. Adopting a quadratic model, we find that the average turning point is between 12 to 16 years for a large sample of U.S. firms. With an...