The Effect of Audit Partner on Accounting Comparability

This study examines the effect of audit partner on accounting comparability. Given that an actual audit engagement is completed by an audit partner and other audit team members, the role of the individual audit partner is substantial in the auditing process. We focus on the effects at engagement partner level since the engagement-level analysis reflects audit style most concretely and accurately, and thus exhibits more direct effect of auditor’s characteristics on financial statement. We conjecture that if audit styles of engagements are similar to each other, the engagements are more likely to yield consistent and comparable accounting information. Consistent with this conjecture, we find that a pair of clients audited by the same audit partner exhibits greater comparability (measured by the similarity of discretionary accruals of the two firms, but not by the similarity of total accruals) than a pair of clients audited by two different partners. This finding suggests the importance of investigation at the audit partner-level effect. In addition, we find that accounting comparability between a pair of clients is only observed when they are audited by the same partner in Big 4 audit firms, but not when they are audited by the same partner in non-Big 4 audit firms. The finding implies that Big 4 partners use relatively similar audit approach for different clients but non-Big 4 partners are more likely to accept the accounting methods preferred by client firms rather than applying their unique styles to their clients. As a result, among non-Big 4 audit firms, the effect of an individual audit partner is relatively less prevalent. Overall, these results provide some evidence about the individual audit partner’s effect on accounting comparability and the variability of audit quality in Big 4 versus non-Big 4 audit firms.