Seeing is believing? Executives' facial trustworthiness, auditor tenure, and audit fees

• 成果类型: Article
• 署名作者: Hsieh, Tien-Shih; Kim, Jeong-Bon; Wang, Ray R.; Wang, Zhihong
• 署名单位: University of Massachusetts System; University Massachusetts Dartmouth; City University of Hong Kong; Hong Kong Baptist University; Clark University
• 刊物名称: JOURNAL OF ACCOUNTING & ECONOMICS
• ISSN/ISSBN: 0165-4101
• DOI: 10.1016/j.jacceco.2019.101260
• 发表日期: 2020
• 关键词: CORPORATE GOVERNANCE; earnings management; 1st impressions; face; amygdala; IMPACT; MODEL; trust; determinants; personality

摘要

Psychology and neuroscience studies document that facial trustworthiness perceptions may affect observers' decision-making process. Our study examines whether auditors' perceptions of client executives' facial trustworthiness are associated with their audit fee decisions. We employ a machine-learning-based face-detection algorithm to measure executives' facial trustworthiness. We find that auditors charge 5.6% less audit fee to firms with trustworthy-looking CFOs than to those with untrustworthy-looking CFOs in initial audit engagements. Auditor tenure weakens the negative association between CFOs' facial trustworthiness and audit fee. Further evidence shows that CFO's facial trustworthiness is associated with neither financial reporting quality nor litigation risk. (C) 2019 Elsevier B.V. All rights reserved.