Do Auditor-in-Charge Characteristics Matter for Audit Quality? Evidence from Nonprofits in the U.S.

• In Event: Partner-Specific Audit Effects

Abstract

Using a sample of nonprofit organizations (NPOs) in the United States (U.S.), where the auditor in charge of the audit is identified, we investigate whether individual auditor characteristics (specifically, experience, ownership in the audit firm, and gender) are associated with audit quality. Our empirical results show that across audit firms of all sizes, female auditors are more conservative than male auditors and are more likely to report internal control problems and issue qualified opinions. After interacting auditor-specific factors with audit firm size, we find that the industry experience of the auditor-in-charge is also important for audit quality. We find that in Big 4 and regional audit firms, experienced auditors are less likely to issue internal control deficiency (ICD) reports than are auditors with less experience from the same audit firm. In small audit firms, however, experienced auditors are more likely to issuance of ICD reports than are auditors with more experience from the same audit firms. In contrast, we find that firm ownership is not associated with the issuance of ICD reports, contrary to our expectations. Our findings, that auditor-specific factors are associated with audit quality, are timely and should be of interest to contribute to U.S. policymakers in their current debates regarding the advisability of requiring audit partner identification for public clients in the U.S.

Authors

• Nancy Chun Feng, Suffolk University

• Karen Ann Kitching, George Mason University

• Linda Ann Myers, University of Arkansas