The Effects of Audit Partner Pre-Client and Client-Specific Experience on Audit Quality and on Perceptions of Audit Quality
National Chengchi University (NCCU) - Department of Accounting
Linda A. Myers
University of Arkansas
Thomas C. Omer
University of Nebraska at Lincoln - School of Accountancy
University of Kentucky - Von Allmen School of Accountancy
Building on the model in O’Keefe et al. (1994) where audit quality is a function of general knowledge, client-specific knowledge, and other factors, we examine the effects of pre-client experience (our proxy for general knowledge) and client-specific experience (our proxy for client-specific knowledge) on audit quality and on perceptions of audit quality. We use data from Taiwan, where the names of signing audit partners are disclosed. Using discretionary accruals to proxy for audit quality and the bank loan interest rate spread to proxy for creditor perceptions of audit quality, we find that an audit partner’s pre-client experience enhances audit quality, but the effect of pre-client experience is reduced with longer partner tenure. Moreover, we find that both pre-client experience and client-specific experience improve creditor perceptions of audit quality. Our findings are important because they reveal that there is information in more finely parsed measures of auditor experience and they provide evidence consistent with the beliefs underlying the Public Company Accounting Oversight Board’s proposal to disclose engagement partner names for U.S. audit engagements because the disclosure of engagement partner identity can provide useful information.
Number of Pages in PDF File: 44
Keywords: Auditor Experience, Pre-Client Experience, Audit Quality, Public Companies, Private Companies
JEL Classification: M49, M41, M43, M47, G12
Date posted: November 21, 2008 ; Last revised: January 8, 2015
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