Partner wealth and audit quality: evidence from the United States

John Xuefeng Jiang (), Shaohua He () and K. Philip Wang ()
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John Xuefeng Jiang: Michigan State University
Shaohua He: Lancaster University
K. Philip Wang: Warrington College of Business, University of Florida

Review of Accounting Studies, 2025, vol. 30, issue 1, No 18, 702-737

Abstract: Abstract Using the market values of audit partners’ houses as a measure of their personal wealth, we find that wealthier U.S. partners provide higher-quality audits, as evidenced by fewer material restatements, fewer material SEC comment letters, and higher audit fees. A battery of falsification tests shows that these findings are not driven by the matching of wealthier partners with clients with higher financial reporting quality. Our additional analyses suggest two explanations: greater personal wealth both incentivizes partners to exert more effort in delivering high-quality audits and reveals partners’ audit competence.

Keywords: Individual partner; Personal wealth; House value; Audit quality (search for similar items in EconPapers)
JEL-codes: M40 M42 (search for similar items in EconPapers)
Date: 2025
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DOI: 10.1007/s11142-024-09828-6

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