AAA Spark Meeting of the Regions

Auditor Masculinity, Engagement Hierarchies, and Audit Quality

• In Event: Gender and Diversity Issues

Abstract

We examine the association between facial width-to-height ratio (fWHR) of auditors and audit quality (i.e., audit fees). We find that high-fWHR auditors charge significantly lower audit fees compared to low-fWHR auditors. Moreover, high-fWHR lead auditors outshine low-fWHR concurring auditors although concurring auditors are on a higher hierarchical engagement level. We find that the effects hold for auditors at partner and non-partner level (i.e., directors and managers). We also show that the effect on audit fees is prevalent in small audit firms but not in Big-4 or medium-sized audit firms, indicating that larger firms benefit from more rigorous quality control structures weakening the effect of individual auditor characteristics. On average, high-fWHR auditors in small audit firms charge 16.1 percent to 22.6 percent lower audit fees compared to low-fWHR auditors. Alternative measures for audit quality (e.g., abnormal accruals, restatements, going concern opinion, reporting accuracy) show mixed evidence. In sum, we find weak evidence that lead auditors’ fWHR is associated with clients’ income-decreasing earnings management in small firms, that clients’ financial statements audited by a high-fWHR auditor are more likely to be restated in subsequent years, and that high-fWHR concurring auditors are more likely to issue less going concern opinions and more Type 2 reporting errors, indicating lower audit quality.

Authors

• Janine Maniora, Heinrich-Heine University Dusseldorf

• Ludwig Hilmer, Heinrich-Heine University Dusseldorf