The Effects of Audit Partner Pre-Client and Client-Specific Experience on Audit Quality and on Perceptions of Audit Quality

Abstract

We examine the associations between audit partner pre-client and client-specific experience and audit quality using data from Taiwan, where signing audit partner names are disclosed. Using discretionary accruals and interest rate spreads to proxy for audit quality and perceptions of audit quality, respectively, we find that both pre-client and client-specific experience improve audit quality and creditor perceptions of audit quality. We also find that audit partner pre-client experience is positively associated with audit quality early in the engagement, but not when the partner has been with the client for at least five years. Our findings provide evidence consistent with the assumption underlying the Public Company Accounting Oversight Board’s decision to require the disclosure of engagement partner names. They also suggest that pre-client experience cannot completely mitigate the loss of client-specific knowledge when partner or audit firm turnover occurs. 

Keywords: Audit Partner Experience, Audit Quality, Discretionary Accruals, Interest Rate Spreads, Auditor Tenure

JEL Classification: M49, M41, M43, M47, G12