Abstract
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.
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.
| Original language | English |
|---|---|
| Publication status | Presented - 31 May 2019 |
| Event | 42nd Annual Conference of the Canadian Academic Accounting Association (2019 CAAA Annual Conference): Mind the GA(A)P - Ottawa Marriott Hotel, Ottawa, Canada Duration: 30 May 2019 → 1 Jun 2019 https://www.caaa.ca/en/news-and-events/caaa-annual-conference-2019-mind-the-ga-a-p/ https://www.caaa.ca/media/234594/caaa-annual-conference-program-online-pdf-2019-05-14.pdf |
Conference
| Conference | 42nd Annual Conference of the Canadian Academic Accounting Association (2019 CAAA Annual Conference) |
|---|---|
| Place | Canada |
| City | Ottawa |
| Period | 30/05/19 → 1/06/19 |
| Internet address |