Audit partner identification and audit quality

Kyungha Kari Lee () and Carolyn B. Levine ()
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Kyungha Kari Lee: Rutgers Business School
Carolyn B. Levine: University of Delaware

Review of Accounting Studies, 2020, vol. 25, issue 2, No 10, 778-809

Abstract: Abstract This paper studies the effects of disclosing the audit engagement partner’s identity on individual and partnership incentives and overall audit quality. We model a collective decision problem, incorporating individual engagement partners’ preferences with the partnership’s choice of internal quality control. In our model, disclosure of the individual engagement partner (on Form AP) influences the probability that clients observe individual partners’ past performance. While Form AP disclosure increases individual partners’ incentives to provide high-quality audits for a given level of internal quality control within the partnership, it may simultaneously decrease the partnership’s incentives to maintain good internal quality control systems, leading to a net degradation in audit quality. Our paper also demonstrates that the level of external audit oversight is critical in determining whether Form AP disclosure enhances audit quality.

Keywords: Audit; Engagement partner; Audit transparency; Partner naming; Audit quality (search for similar items in EconPapers)
JEL-codes: M41 M42 M48 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1007/s11142-020-09533-0

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