Audit Partners and Loan Loss Provisioning: Evidence from U.S. Bank Holding Companies

Gauri Bhat (), Hemang Desai (), Christoffer Koch, Erik J. Mayer () and Nitzan Tzur-Ilan
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Gauri Bhat: https://www.smu.edu/cox/our-people-and-community/faculty/Gauri-Bhat
Authors registered in the RePEc Author Service: W Scott Frame

No 2209, Working Papers from Federal Reserve Bank of Dallas

Abstract: This paper uses confidential data on audit engagement partner names from regulatory filings of bank holding companies (BHC) to investigate whether partners display individual style that affects the financial reporting of the BHCs. We focus on loan loss provisioning. We construct an audit partner-BHC matched panel data set that enables us to track different partners across different BHCs over time. We employ two empirical approaches to investigate partner style. The first approach tests whether partner fixed effects are statistically significant in loan loss provisioning models. The second approach tests whether a partner’s history of loan loss provisioning predicts future practices for the same partner. Our empirical evidence does not support systematic differences in loan loss provisioning across audit engagement partners, suggesting that the audit firm’s standards and quality control constrain personal partner style.

Keywords: auditing; banking; Audit Partner Names; Audit Engagement; PCAOB; audit partner tenure; auditor rotation (search for similar items in EconPapers)
JEL-codes: G21 J01 J44 L84 M21 M42 (search for similar items in EconPapers)
Pages: 64
Date: 2022-07-08, Revised 2024-11-20
New Economics Papers: this item is included in nep-acc and nep-ban
Note: This revision has a new title and a new author.
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Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:fip:feddwp:94488

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DOI: 10.24149/wp2209r1

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