Office Managing Partners and Audit Quality

• In Event: U.S. Audit Partners

Abstract

This study investigates the relation between the line of service (audit, tax, advisory) of Big Four office managing partners (OMPs) and non-audit service fees and audit quality. Given that audit quality has been shown to vary across offices and because office-level leadership can impact the office environment, I examine the impact of the OMP’s line of service on audit quality and non-audit service fees. I find that when an accounting firm office changes leadership to an advisory OMP, non-audit service revenues increase, but audit quality suffers. This finding is consistent with advisory partners encouraging an office environment that focuses on selling non-audit services rather than conducting high-quality audits. Overall, this study provides evidence consistent with regulators’ concerns that the recent trend toward greater advisory services at the largest accounting firms decreases audit quality by reducing their focus on providing high quality audits.

Author

• Michael J Mowchan, Arizona State University - Tempe