The Impact of Partners' Economic Incentives on Audit Quality in Big 4 Partnerships

• 成果类型: Article
• 署名作者: Dekeyser, Simon; Gaeremynck, Ann; Knechel, W. Robert; Willekens, Marleen
• 署名单位: KU Leuven; State University System of Florida; University of Florida; University of Auckland; University of New South Wales Sydney; BI Norwegian Business School
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/TAR-2018-0109
• 发表日期: 2021
• 页码: 129-152
• 关键词: earnings management; PRIVATE; FIRMS; CONTRACTS

摘要

Economic incentives are fundamental for understanding auditor behavior. In this paper, we investigate the association between the extent of partners' fee-based compensation, partners' observable net wealth, and audit quality. Using a sample of Belgian Big 4 audit firms and their predominantly private clients, our results suggest a negative association between audit quality and partner fee-based compensation, and a positive association between audit quality and partner observable net wealth. Moreover, our results show that the latter association is most significant when a partner is carrying a lot of debt, which indicates that a partner's financial situation may affect audit quality. The extent of fee-based incentives also varies among partners of the same audit firm. Furthermore, partner and client characteristics differ based on the extent of fee-based compensation. Our findings should be of interest to regulators and audit firms, as they suggest that audit partners' economic incentives significantly affect audit quality.