Audit Partners with Outside Appointments and Audit Quality

Project: Research

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Description

To provide high-quality audit service, audit firms rely on their most valuable assets – audit talent. Auditors’ financial knowledge and industry expertise naturally would affect the audit outcome. Prior studies find that auditor characteristics such as gender, age, general intellectual ability (IQ), and personal experience (e.g., born in an economic recession) could significantly affect audit quality. For example, auditors who started their careers in economic downtowns tend to have a higher degree of professional skepticism and are more likely to issue modified audit opinions. Auditor busyness or distraction caused by workload compression and time pressure could also harm audit quality. In this proposed study, we use a novel data source to explore another important characteristic of audit partners: outside appointments. Anecdotal evidence shows that audit partners are valuable business advisors and can be appointed board members or invited as co-investors of a firm. However, we know little about the prevalence of audit partners having outside appointments and whether outside appointments affect audit quality. Our proposed research aims to shed light on these questions, by exploring the individual auditor information in China. As far as we know, our study would be the first to investigate audit partners’ outside appointment activities. Our research results could have important policy implications. If assuming outside appointments would compromise audit partners’ audit quality, regulators may consider setting a restriction on such activities

Detail(s)

Project number9043603
Grant typeGRF
StatusActive
Effective start/end date1/08/23 → …