Gender Diversity and Audit Quality: Evidence from the Pairing of Audit Partners

Abstract

Using the Chinese setting where two partners are assigned to lead each engagement, we find that gender-diverse partner pairs improve audit quality compared to same-gender partner pairs. We show that the positive effect of partner gender diversity is concentrated in the engagements led by two partners with similar seniority or collaborating as signatory partners for an engagement before or in clients with complex operations. We evaluate two potential factors that could drive the positive effect of partner gender diversity, namely, the perspective-broadening and the human capital factors, and show that perspective-broadening prevails, whereas the human capital factor does not. Our results are robust to controlling for endogeneity and using alternative measures of audit quality.

Keywords: auditor; auditor pairing; gender diversity; audit quality

JEL Classification: M42; M14; M41