Audit Partner Disclosure: An Experimental Exploration of Accounting Information Contagion

Posted: 12 Jan 2012 Last revised: 15 Jul 2017

See all articles by Tamara A. Lambert

Tamara A. Lambert

Lehigh University

Benjamin L. Luippold

Babson College

Chad M. Stefaniak

University of South Carolina

Date Written: July 1, 2017

Abstract

We explore potential effects of a new Public Accounting Oversight Board (PCAOB) rule that requires disclosure of the external audit partner’s identity. By manipulating the presence or absence of audit partner disclosure (APD), we examine how investors might react to APD and the mechanism behind such reaction. We find that prospective investors are less likely to invest in a peer firm linked to a restating firm via APD than when the link is only through audit firm and industry. This effect is mediated by investors’ restatement likelihood assessments. Our study makes several contributions. First, we add empirical evidence to the emerging debate on the impact of APD to U.S. markets. Second, we experimentally demonstrate investor information contagion and provide support for one mechanism (speculated by archival-based literature) through which it works. Finally, we provide evidence that investors attribute more blame to partners for a negative outcome due to APD.

Keywords: Audit Partner Disclosure, Contagion, Information Transfer, Representativeness

JEL Classification: M42, M48

Suggested Citation

Lambert, Tamara A. and Luippold, Benjamin L. and Stefaniak, Chad M., Audit Partner Disclosure: An Experimental Exploration of Accounting Information Contagion (July 1, 2017). Behavioral Research in Accounting, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1983482 or http://dx.doi.org/10.2139/ssrn.1983482

Tamara A. Lambert

Lehigh University ( email )

621 Taylor Street
Bethlehem, PA 18015
United States

Benjamin L. Luippold (Contact Author)

Babson College ( email )

231 Forest St.
Babson Park, MA 02457-0310
United States
(781) 239 5995 (Phone)

Chad M. Stefaniak

University of South Carolina ( email )

701 Main Street
Columbia, SC 29208
United States

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