The effects of audit partner pre-client and client-specific experience on audit quality and on perceptions of audit quality

Chi, Wuchun; Myers, Linda A.; Omer, Thomas C.; Xie, Hong

doi:10.1007/s11142-016-9376-9

Cited by 128 publications

(121 citation statements)

References 45 publications

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“…However, it should be noted that in the most similar studies to ours (Chi et al, 2017;Chi & Chin, 2011) the effects of industry specialization on audit quality measured by discretionary accruals appeared to be rather weak, as significance was reported only at marginal levels (P < . 10).…”

Section: Discretionary Accrualsmentioning

confidence: 45%

“…However, in the analysis with discretionary accruals, significance was reported only at marginal levels. More recently, Chi et al (2017) also reported marginally significant effects of industry specialization on discretionary accruals and nonsignificant effects on interest rate spreads.…”

Section: Evidence At the Audit Partner Levelmentioning

confidence: 97%

“…However, as posed by Bedard (2012), while most prior studies have shown that industry-specialist auditors working in their industries outperform other auditors, some exceptions also exist (e.g., Bedard & Biggs, 1991;Solomon, Shields, & Whittington, 1999). Some prior studies have empirically examined the impact of the industry specialization of individual auditors on various proxies of audit quality: accounting restatements (Chin & Chi, 2009), discretionary accruals (Chi et al, 2017;Chi & Chin, 2011), the likelihood of a modified opinion in the audit report (Chen et al, 2010;Chi & Chin, 2011), audit fees (Goodwin & Wu, 2014;Zerni, 2012), the ownership structure of syndicated loans (Chin et al, 2014), and interest spreads on loans (Chi et al, 2017). These articles tend to agree that the industry specialization of audit partners contributes to the building up of expertise and, thus, to higher quality audit services.…”

Section: Evidence At the Audit Partner Levelmentioning

confidence: 99%

“…While the industry specialization of audit firms has attracted a lot of attention (e.g., Balsam, Krishnan, & Yang, 2003;Carson, 2009;Casterella, Francis, Lewis, & Walker, 2004;Craswell, Francis, & Taylor, 1995; DeFond, Francis, & Wong, 2000;Dunn & Mayhew, 2004), few papers have investigated how the industry specialization of individual auditors impacts audit quality (Chi & Chin, 2011;Chin & Chi, 2009;Chin, Yao, & Liu, 2014;Goodwin & Wu, 2014;Zerni, 2012). Owing to the data availability, evidence at the individual auditor level is limited to just four countries: Taiwan (Chi & Chin, 2011;Chi, Myers, Omer, & Xie, 2017;Chin et al, 2014;Chin & Chi, 2009), Sweden (Zerni, 2012), Australia (Goodwin & Wu, 2014) and Owing to the data availability, evidence at the individual auditor level is limited to just four countries: Taiwan (Chi & Chin, 2011;Chi, Myers, Omer, & Xie, 2017;Chin et al, 2014;Chin & Chi, 2009), Sweden (Zerni, 2012), Australia (Goodwin & Wu, 2014) and…”

mentioning

confidence: 99%

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Audit partner industry specialization and audit quality: Evidence from Spain

García-Blandón¹,

Argilés

2017

Int J Auditing

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We investigate the impact of the industry specialization of individual auditors on audit quality. We aim to contribute to a quickly growing line of research examining the importance of audit partners as determinants of audit quality. To provide robust results, we use several proxies of both industry specialization and audit quality. We conduct the empirical analysis with a sample of Spanish listed companies for the research period between 2005 and 2013. Our main result is the lack of a significant impact of the industry specialization of audit partners on audit quality. This result seems sound, as it holds for the several measures of industry specialization and audit quality used in the empirical study. Our main result, which contradicts most of the scarce available evidence, would stress the importance of the institutional context in the study of the industry specialization–audit quality relationship and advocates the need for further research.

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Section: Discretionary Accrualsmentioning

confidence: 45%

Section: Evidence At the Audit Partner Levelmentioning

confidence: 97%

Section: Evidence At the Audit Partner Levelmentioning

confidence: 99%

mentioning

confidence: 99%

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Audit partner industry specialization and audit quality: Evidence from Spain

García-Blandón¹,

Argilés

2017

Int J Auditing

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“…They showed that an audit partner's past performance determines the probability of client firms' future financial restatements and that this association is more pronounced for engagement partners than for review partners. Chi, Myers, Omer, and Xie () examined a sample of firms in Taiwan, where the disclosure of audit partners' signature is mandatory. They found a positive association between audit partners' pre‐client experience and audit quality in the early years of the audit engagement, but not in the later years.…”

Section: Background and Prior Researchmentioning

confidence: 99%

Impact of the disclosure of audit engagement partners on audit quality: Evidence from the USA

Dao

Liu

2019

Int J Auditing

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The debate concerning the recent regulation in the USA mandating accounting firms to disclose engagement partners' identity is ongoing. We examine the impact of the Public Company Accounting Oversight Board's (PCAOB's) requirement of disclosing engagement partners' names on Form AP on the quality of audit engagements. Using two measures of audit quality (abnormal accruals and the probability of detecting material weaknesses in internal control), we find that disclosing engagement partners' names is associated with a lower level of abnormal accruals and a higher probability of accounting firms detecting material weaknesses in internal control. Our study extends the contemporary research on the disclosure of engagement partners' identification by providing additional evidence to the literature on this issue in the U.S. setting. Our study also provides evidence supporting the PCAOB's perception that this disclosure leads to higher audit quality.

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To control or to compromise? The prominence of chief compliance officer and foreign corrupt practices act violation

Liu

2021

J Corp Accounting Finance

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We investigate the influence of chief compliance office (CCO) prominence in the corporate management team on FCPA violation and audit fees. Based on the compliance function leader's position seniority, we find that a CCO's position rank is positively associated with the propensity of FCPA violation. It indicates that promoting CCO in the firm can facilitate more aggressive compliance policies—it is a “compromise” instead of a “control.” We also find that CCO prominence is positively associated with audit fees even without an FCPA violation happening, which implies that auditors could fully perceive the potential risks embedded in the compliance chief's promotion. The results of this study can be of interest to audit practitioners as well as regulators to better monitor the firms with higher FCPA violation risks.

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The effects of audit partner pre-client and client-specific experience on audit quality and on perceptions of audit quality

Cited by 128 publications

References 45 publications

Audit partner industry specialization and audit quality: Evidence from Spain

Audit partner industry specialization and audit quality: Evidence from Spain

Impact of the disclosure of audit engagement partners on audit quality: Evidence from the USA

To control or to compromise? The prominence of chief compliance officer and foreign corrupt practices act violation

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