Audit Partner Gender and the Reporting of Conservative Earnings

• In Event: Doctoral Student-Faculty Interchange: Audit, Tax, and Diversity

Abstract

This study examines whether the degree of client’s conditional accounting conservatism varies with audit partner gender. The results obtained using the Basu (1997) measure of accounting conservatism indicate that engagements audited by female audit partners are associated with less conservative earnings than those audited by male audit partners in general. Next, these results vary across client importance and litigation risk. In particular, female auditors are less conservative for clients that are less important to the audit firm, but there is no gender difference in conservatism for more important clients. Further, female auditors are less conservative in low litigation risk settings, but there is no gender difference in conservatism when the threat of legal liability is high. These findings are robust to controlling to the inclusion of various control variables and are supported partially using alternative measures of conservatism and after control for potential endogeneity in the choice of the gender of an audit partner. Collectively, the results in this study provide additional evidence on the important role audit partner characteristics pay in the quality of financial statements audits as measured by the degree of accounting conservatism.

Authors

• Henri Akono, University of Maine - Orono

• Khondkar E Karim, University of Massachusetts-Lowell

• Anqi Tao, University of Massachusetts-Lowell