Audit Partner Identification, Assignment, and Audit Quality

Conventional wisdom suggests that partner identification disclosure can improve audit quality, because it may enhance transparency and individual accountability. Building on a two-period matching model, we argue that the disclosure may distort partner-client assignment--which affects audit quality and/or audit fees--because the disclosure can inform the labor market for audit talent. In a centralized assignment in which an audit firm assigns partners to clients, we find that with the disclosure, audit firms may distort partner assignment--at the expense of lower audit quality--in order to dampen partners' career advancement. In a decentralized assignment in which partners directly bid for clients, the disclosure gives rise to low-balling in the first-period, because partners aggressively lower the audit fees to maximize their career advancement. Our findings identify unintended consequences of audit partner identification disclosure and provide economic reasons for the mixed empirical findings.