The Relative Importance of Auditor Characteristics Versus Client Factors in Explaining Audit Quality

Mara Cameran*, Domenico Campa, Jere R. Francis

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

Abstract

The U.K. listed firms are used to investigate whether auditor attributes (fixed effects for audit firms, audit offices, and audit partners) add incrementally to baseline models with client controls in explaining audit quality. We document that accounting firm fixed effects add significantly to baseline models. To the extent an accounting firm can standardize its audits, there should be no differences across engagements. However, we find significant interoffice differences, and also significant inter-partner differences within offices.R(2)analyses, hierarchical linear models, LASSO (least absolute shrinkage and selection operator) regressions, andR(2)decomposition analyses all show that partners are the most important auditor-related characteristic. To better understand the cause of partner variation, we test a set of partner demographic variables (in lieu of partner fixed effects), but we find that they explain little variation, once we control for firm and office differences. We conclude that partner variation is important in explaining audit quality, but understanding the causes requires going beyond existing publicly available demographic data.
Original languageEnglish
Article number0148558X20953059
Pages (from-to)751-776
Number of pages26
JournalJournal of Accounting, Auditing & Finance
Volume37
Issue number4
Early online date13 Sept 2020
DOIs
Publication statusPublished - Oct 2022

Keywords

  • accounting firms
  • audit offices
  • engagement partners
  • earnings quality
  • going concern reports
  • restatements
  • OFFICE SIZE
  • EARNINGS
  • PERFORMANCE
  • TEAMS
  • PERSONALITY
  • EXPERIENCE
  • LEADERSHIP
  • EXPERTISE
  • MANAGERS
  • SHAPLEY

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