AAA Spark Meeting of the Regions

The Effect of Board Gender Culture on Audit Partner Selection and Audit Fee Resourcing: Females in Critical Mass

• In Event: Gender and Diversity Issues

Abstract

In light of recent legislative requirements for female board member diversity quotas at NASDAQ and California headquartered firms, we examine audit partner selection and audit partner investment in the United States from 2016-2020. Specifically, we consider whether minority-represented female board members can impact audit partner selection decisions when they are represented in “Critical Mass,” or hold at least 3 positions on their board, defined as “Inclusive” board culture versus “Exclusive” boards without female members. Our study utilizes individual audit partner data obtained from PCAOB Form AP filings and develops board culture metrics from Institutional Shareholder Services. We find that Inclusive boards are positively associated with female audit partners, while Exclusive boards are not, suggesting that Inclusive boards may be utilizing their influence to make audit partner selection decisions. Moreover, we find that Inclusive boards involved with female audit partners are associated with higher audit fees suggestive of specific investment in female-led audit engagements by the board. We also find companies with Inclusive boards have higher financial statement quality. Collectively, our results suggest that board gender culture influences audit partner selection and audit engagement resourcing.

Authors

• Janean Rundo, University of Cincinnati

• Lingting Jiang, University of Cincinnati