Does the Identity of Engagement Partners Matter? An Analysis of Audit Partner Reporting Decisions

• 成果类型: Article
• 署名作者: Knechel, W. Robert; Vanstraelen, Ann; Zerni, Mikko
• 署名单位: State University System of Florida; University of Florida; Maastricht University; University of Jyvaskyla
• 刊物名称: CONTEMPORARY ACCOUNTING RESEARCH
• ISSN/ISSBN: 0823-9150
• DOI: 10.1111/1911-3846.12113
• 发表日期: 2015
• 页码: 1443-+
• 关键词: financial statement verification; corporate governance; Private Firms; office size; big 4; QUALITY; cost; disclosure; accruals; INFORMATION

摘要

This study examines the persistence and economic consequences of variations in reporting style across audit partners in individual engagements. Our results show that both aggressive and conservative audit reporting, measured by the pattern of prior Type 2 and Type 1 audit reporting error rates in auditor-specific clienteles, persist over time and extend to other clients of the same partner. Analyses of abnormal accruals and persistence of client firms' accrual estimates corroborate this finding, and hold both for private and publicly listed companies. Further, our results also show that the market penalizes client firms susceptible to aggressive audit partner reporting decisions. In particular, we find that our proxies for aggressive audit reporting are related to higher interest rates, worse credit ratings and less favorable forecasts of insolvency for private client companies, and a lower Tobin's Q for publicly listed client companies. Collectively, these results imply that audit partner aggressive or conservative reporting is a systematic audit partner attribute and not randomly distributed across engagements.