Document Type
Article
Publication Date
10-2024
Publisher
Wiley
Source Publication
Journal of Business Finance & Accounting
Source ISSN
0306-686X
Original Item ID
DOI: 10.1111/jbfa.12798
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).
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Recommended Citation
Frost, Tracie; He, Zhijian; Luo, Xin; and Stice, Derrald, "Audit Partner Style and Financial Statement Comparability: New Evidence from the US Market" (2024). Accounting Faculty Research and Publications. 150.
https://epublications.marquette.edu/account_fac/150
Comments
Published version. Journal of Business Finance & Accounting, Vol. 51, No. 9-10 (October-November 2024): 2763-2790. DOI. © 2024 The Authors. Journal of Business Finance & Accounting published by John Wiley & Sons Ltd. Used with permission.
This is an open access article under the terms of the Creative Commons Attribution-NonCommercial-NoDerivs License, which permits use and distribution in any medium, provided the original work is properly cited, the use is non-commercial and no modifications or adaptations are made.