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Article: Audit partner style and financial statement comparability: New evidence from the US market
Title | Audit partner style and financial statement comparability: New evidence from the US market |
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Authors | |
Issue Date | 21-Mar-2024 |
Publisher | Wiley |
Citation | Journal of Business Finance and Accounting, 2024 How to Cite? |
Abstract | We explore the influence of individual audit partner style on financial statement comparability in a US setting using newly available data. We find evidence of an audit partner style effect on comparability incremental to audit firm and audit office effects. Our results are consistent across several comparability measures and are economically significant. For example, the audit partner effect is associated with a 12.59% decrease in the mean difference in abnormal accruals compared with a 4.4% decrease for firm pairs audited by the same Big 4 audit office. We also find that audit partner expertise and experience have a greater influence on comparability than audit office expertise and experience. Our results are consistent in endogeneity and robustness tests including (1) auditor switching tests, (2) entropy balancing, (3) placebo tests and (4) controlling for clients’ economic similarity. Our results suggest that the association between audit partner style and financial statement comparability persists in highly regulatory environments and corroborate the PCAOB's intuition that the role of the engagement partner “is of singular importance” to the outcome of the audit (PCAOB 2011). |
Persistent Identifier | http://hdl.handle.net/10722/342118 |
ISSN | 2023 Impact Factor: 2.2 2023 SCImago Journal Rankings: 1.283 |
DC Field | Value | Language |
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dc.contributor.author | Frost, Tracie | - |
dc.contributor.author | He, Zhijian Chris | - |
dc.contributor.author | Luo, Xin | - |
dc.contributor.author | Stice, Derrald | - |
dc.date.accessioned | 2024-04-02T08:25:42Z | - |
dc.date.available | 2024-04-02T08:25:42Z | - |
dc.date.issued | 2024-03-21 | - |
dc.identifier.citation | Journal of Business Finance and Accounting, 2024 | - |
dc.identifier.issn | 0306-686X | - |
dc.identifier.uri | http://hdl.handle.net/10722/342118 | - |
dc.description.abstract | <p>We explore the influence of individual audit partner style on financial statement comparability in a US setting using newly available data. We find evidence of an audit partner style effect on comparability incremental to audit firm and audit office effects. Our results are consistent across several comparability measures and are economically significant. For example, the audit partner effect is associated with a 12.59% decrease in the mean difference in abnormal accruals compared with a 4.4% decrease for firm pairs audited by the same Big 4 audit office. We also find that audit partner expertise and experience have a greater influence on comparability than audit office expertise and experience. Our results are consistent in endogeneity and robustness tests including (1) auditor switching tests, (2) entropy balancing, (3) placebo tests and (4) controlling for clients’ economic similarity. Our results suggest that the association between audit partner style and financial statement comparability persists in highly regulatory environments and corroborate the PCAOB's intuition that the role of the engagement partner “is of singular importance” to the outcome of the audit (PCAOB 2011).<br></p> | - |
dc.language | eng | - |
dc.publisher | Wiley | - |
dc.relation.ispartof | Journal of Business Finance and Accounting | - |
dc.title | Audit partner style and financial statement comparability: New evidence from the US market | - |
dc.type | Article | - |
dc.identifier.doi | 10.1111/jbfa.12798 | - |
dc.identifier.eissn | 1468-5957 | - |
dc.identifier.issnl | 0306-686X | - |