Do Investors Care Who Did the Audit? Evidence from Form AP

Doxey, Marcus M.; Lawson, James; Lopez, Thomas J.; Swanquist, Quinn Thomas

doi:10.1111/1475-679x.12392

Cited by 43 publications

(12 citation statements)

References 68 publications

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“…20 The consensus from our interviews is that managing internally focused reputations is more critical to the partners' careers, 19. Preliminary evidence from a two-year window suggests EPI disclosure does not have a significant market response (Doxey et al 2021); however, the authors acknowledge a small sample and short window. 20.…”

Section: Do Engagement Partners Believe Public Disclosure Of Their Id...mentioning

confidence: 82%

Mandatory Disclosure of Engagement Partner Identity: Insights from Practice*

Brown

Gissel

Vitalis

2022

Accounting Perspectives

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This study uses semistructured interviews to gain insights from 19 practicing Canadian audit partners into the practical implications of the engagement partner identity mandate requiring firms to disclose the identity of the engagement partner(s) auditing Canadian publicly traded companies. Building on prior literature that suggests accountability can reach a ceiling, we explore whether audit partners perceive incremental increases in accountability pressures to be effective in increasing audit quality. Based on the existing literature, we propose a nonlinear relation between accountability and performance (audit quality, in the current context), reflecting this ceiling effect. We find partners believe they are reaching, or are at, a ceiling level of accountability and that further initiatives to increase their accountability are ineffective in eliciting procedural changes in the audit or the audit's outcome. Contrary to regulators' motives for the disclosure, our interviewed partners do not believe the transparency of publicly disclosing their names will further increase their level of accountability or overall audit quality. We document that one possible reason for the disconnect is that partners are less concerned with managing external reputation than with managing internal reputation, which they believe has a more direct impact on their careers. We also discuss partners' perceptions of the required disclosure's impact on individual reputations, client risk choices, personal safety, and partner recruitment. We offer suggestions for future research building on the partners' insights.

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Section: Do Engagement Partners Believe Public Disclosure Of Their Id...mentioning

confidence: 82%

Mandatory Disclosure of Engagement Partner Identity: Insights from Practice*

Brown

Gissel

Vitalis

2022

Accounting Perspectives

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“…89 89 Recent research in the US setting finds little evidence that the disclosure of audit partner identity in Form AP leads to changes in audit outcomes or investor responses (Cunningham et al 2019; Doxey et al 2021). In contrast, there is evidence of improved audit quality after the adoption of the partner signature requirement in the United Kingdom (Carcello and Li 2013).…”

mentioning

confidence: 99%

Behavioral Economics of Accounting: A Review of Archival Research on Individual Decision Makers*

Hanlon

Yeung

Zuo

2021

Contemporary Accting Res

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This paper develops a unified framework to synthesize the growing stream of positive research on the role of individual decision makers in shaping observed accounting phenomena. This line of research recognizes two central ideas in behavioral economics. First, individual behavior depends not only on economic incentives and accessible information but also on individual preferences, abilities, experiences, and other characteristics. Second, the constraints that structure human interactions encompass both formal institutions (e.g., rules, laws, constitutions) and informal institutions (e.g., norms, conventions, rituals). Our review covers a broad set of individuals who are of interest in accounting research: managers, directors, audit partners, analysts, standard setters, politicians, judges, journalists, loan officers, financial advisors, and investors. We aim to understand the systematic effects of individual characteristics on a wide spectrum of accounting phenomena, including financial reporting, disclosure, tax planning, auditing, and corporate social responsibility. We highlight the importance of personal characteristics not only for an individual's own behavior but also for others' perceptions. Our review mainly focuses on archival research in accounting and provides some thoughts about opportunities for archival empiricists going forward. We also, when feasible, highlight opportunities for future field, survey, and experimental research. A central takeaway from our review is that individual‐level factors significantly improve our ability to explain and predict accounting phenomena beyond firm‐, industry‐, and market‐level factors.

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“…Third, a recent study by Doxey et al. [2021] finds no evidence of an incremental market response around the Form AP disclosure of component auditors; we interpret this as evidence that investors were previously aware of this information. For these reasons, we believe it is reasonable to assume investors had expectations about the involvement of component auditors in group audits during the sample period.…”

Section: Data and Sample Constructionmentioning

confidence: 59%

“…In a recent study, Doxey et al. [2021] examine the market reaction to disclosure of component auditors on Form AP filings. They find no evidence of an incremental market response and conclude that component auditor disclosures do not meaningfully influence investment decisions.…”

Section: Introductionmentioning

confidence: 99%

Do U.S. Investors Value Foreign Component Auditors?

Chen

Conaway

2022

J of Accounting Research

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We examine whether investors consider foreign component auditors when assessing the value of U.S. multinational corporations (MNCs) using two sets of Public Company Accounting Oversight Board (PCAOB) international regulatory events. We find investors react negatively when the PCAOB is denied access to inspect foreign component auditors in jurisdictions where a U.S. MNC has significant operations and positively when those countries later allow inspection. For foreign component auditors that are inspected, we find investors react positively when they receive clean inspection reports and negatively when they fail to remediate quality control deficiencies. Consistent with PCAOB international oversight providing additional assurance about foreign component auditor quality, our collective results indicate investors consider foreign component auditors when valuing U.S. MNCs.

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Do Investors Care Who Did the Audit? Evidence from Form AP

Cited by 43 publications

References 68 publications

Mandatory Disclosure of Engagement Partner Identity: Insights from Practice*

Mandatory Disclosure of Engagement Partner Identity: Insights from Practice*

Behavioral Economics of Accounting: A Review of Archival Research on Individual Decision Makers*

Do U.S. Investors Value Foreign Component Auditors?

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