Audit partner style and financial statement comparability: New evidence from the US market

Tracie Frost, Zhijian Chris He, Xin Luo and Derrald Stice

Journal of Business Finance & Accounting, 2024, vol. 51, issue 9-10, 2763-2790

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).

Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/jbfa.12798

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bla:jbfnac:v:51:y:2024:i:9-10:p:2763-2790

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0306-686X

Access Statistics for this article

Journal of Business Finance & Accounting is currently edited by P. F. Pope, A. W. Stark and M. Walker

More articles in Journal of Business Finance & Accounting from Wiley Blackwell
Bibliographic data for series maintained by Wiley Content Delivery ().