The importance of audit partners' risk tolerance to audit quality

IF 3.2 3区 管理学 Q1 BUSINESS, FINANCE
Jeffrey Pittman, Sarah E. Stein, Delia F. Valentine
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引用次数: 0

Abstract

Relying on their history of legal infractions to measure individuals' risk tolerance, we examine the association between engagement partners' risk appetites and audit quality in the United States. Criminology and economics research links infraction activity with enduring personality traits that capture an individual's risk tolerance. Our evidence supports the prediction that partners known to engage in risky off-the-job behaviors conduct lower quality audits. Specifically, we find that clients of partners with prior legal infractions exhibit a higher likelihood of material misstatements revealed through subsequent restatements, greater propensity to misstate based on the F-score, more instances of “missed” material weaknesses, and less timely loss recognition, while also paying lower audit fees. In cross-sectional results consistent with expectations, we generally find that the impact of partners' risk tolerance on audit quality is more heavily concentrated in clients of non–Big 4 firms and offices without industry expertise. Collectively, our analysis contributes to emerging research on the role that individual partner characteristics play in shaping audit outcomes.

审计合伙人风险承受能力对审计质量的重要性
根据他们的违法历史来衡量个人的风险承受能力,我们研究了美国审计业务合伙人的风险偏好与审计质量之间的关系。犯罪学和经济学研究将违规行为与持久的个性特征联系起来,这些个性特征反映了个人的风险承受能力。我们的证据支持这样一种预测,即已知从事有风险的非工作行为的合伙人会进行较低质量的审计。具体而言,我们发现先前有违法行为的合伙人的客户在随后的重述中表现出更高的重大错报的可能性,更倾向于基于f分的错报,更多的“遗漏”重大弱点的例子,以及更少的及时损失确认,同时也支付了更低的审计费用。在与预期一致的横截面结果中,我们普遍发现合伙人风险承受能力对审计质量的影响更多地集中在非四大会计师事务所和不具备行业专长的事务所的客户身上。总的来说,我们的分析有助于对个别合伙人特征在形成审计结果中所起作用的新兴研究。
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来源期刊
CiteScore
6.20
自引率
11.10%
发文量
97
期刊介绍: Contemporary Accounting Research (CAR) is the premiere research journal of the Canadian Academic Accounting Association, which publishes leading- edge research that contributes to our understanding of all aspects of accounting"s role within organizations, markets or society. Canadian based, increasingly global in scope, CAR seeks to reflect the geographical and intellectual diversity in accounting research. To accomplish this, CAR will continue to publish in its traditional areas of excellence, while seeking to more fully represent other research streams in its pages, so as to continue and expand its tradition of excellence.
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