AAA Spark Meeting of the Regions

Audit Partner Education and Audit Quality

• In Event: Auditor Quality

Abstract

Research on audit engagement partner characteristics has quickly grown following the mandated disclosure of the audit engagement partner in the US. However, little research has been conducted on the effects of the audit engagement partner’s education. In this study we investigate whether audit engagement partner’s educational backgrounds affect their audit quality. Specifically, we investigate whether master degree and Master of Accountancy degree attainment improves the audit engagement partner’s audit quality. We find that the clients audited by partners with a master’s degree have lower probabilities of restatement, lower discretionary accruals, and lower probabilities of meeting or beating earning benchmarks than clients who are audited by partners without master’s degrees. We also find that audit partners with Master of Accountancy degrees perform higher quality audits-their clients have lower probabilities of restatement, lower discretionary accruals, and lower probabilities of meet or beat earning behavior. Further, these results are generally robust to controls for potential selection bias, audit engagement partner age/experience, and auditor switches. Our results evidence the importance of the AICPA’s early recommendations that accountants pursue graduate degrees to achieve 150 credits rather than another path.

Authors

• Matthew A. Notbohm, University of North Dakota

• Zsófia Bárándi, University of North Dakota

• Katherine Campbell, University of North Dakota

• Xiaoli Guo, University of North Dakota