Audit Quality: Does Gender Composition of Audit Firms Matter?

Abstract

Using a sample of Portuguese audit firms and their client companies, this study examines the association between gender composition of the partnership structure of audit firms and audit quality. Audit quality is measured through the earnings quality of audit clients. We find that gender diversity in the partnership structure of audit firms, per se, has no association with audit quality. In turn, we find significant evidence that a predominant presence of female CPAs in partner positions in audit firms is associated with higher audit quality. In particular, the results indicate that audit firms with female dominated partnership structures are negatively related with aggressive accounting practices in audit clients.

Keywords: Gender Diversity; Audit Quality; Earnings Quality; Portugal

JEL Classification: M4, M42