Audit Tenure and the Equity Risk Premium

The book "Audit Tenure and the Equity Risk Premium" by Rana Baker examines the effects of the long-term relationship between companies and their auditors on perceived audit quality. In particular, it analyzes how a prolonged collaboration between a company and its auditing firm can impair the auditor's independence. This close relationship could lead to conflicts of interest that negatively impact the audit process. The book poses the central question of whether the duration of the audit relationship affects the perceived quality of the audit by investigating the relationship between audit tenure and the client's specific equity risk premium. This premium represents the excess of specific equity costs over the risk-free interest rate and is a crucial factor in assessing a company's financial health.