Patrick Krauß, Benedikt M. Quosigk, Henning Zülch

• Using a matched sample of 1,806 firm-year observations from Germany and the United States over the sample period from 2005 to 2010, this paper examines potential differences of audit tenure effects on audit quality in both countries. Our empirical results show that audit firm tenure is neither in Germany nor in the United States a significant factor with regard to the quality of the conducted audits. Nevertheless, our results also show that the levels for unsigned and income-increasing discretionary accruals for German companies are significantly higher than for matched firm observations from the United States. We suggest that the differences in the accrual levels have at least two explanations. Firstly, the less restrictive institutional eironment in Germany and secondly, the use of divergent accounting standards in both countries contribute to the differences. Our results are robust to a variety of sensitivity tests.