The Pricing of Audit Partner Experience in the U.S.

• In Event: Research Paper Session—Auditing

Abstract

This paper is the first to examine the relation between audit partner experience, proxied by tenure at the audit firm, and audit fees in the U.S. Currently audit partner identity is not disclosed in audit opinions. We circumvent this data limitation by obtaining a sample of auditor-client-year observations from instances in SEC comment letter correspondence between companies and the SEC in which companies copy their audit partners. We then hand-collect data from LinkedIn on the year the audit partner began working as an auditor, began working at the current audit firm, and graduated from college. We analyze a sample of 769 client-year observations for 479 audit partners from the period 2004-2014 and find a positive relation between audit partner experience and audit fees, after controlling for other determinants of audit fees, industry fixed effects, and year fixed effects. We also examine partner gender and find that there is a female audit fee premium in the U.S. Consequently, this paper provides the initial evidence of the relation between audit partner characteristics, such as experience and gender, and audit fees in the U.S.

Authors

• Aleksandra B Zimmerman, Case Western Reserve University

• Albert L. Nagy, John Carroll University