Female Auditors and Accruals Quality

Abstract

This paper examines the association between accruals quality and the gender of the firm’s audit engagement partner. In particular, given the documented gender-based differences in diligence, conservatism, and risk tolerance, we postulate that female auditors may improve accruals quality. Using a sample of Finnish and Swedish NASDAQ OMX listed firms, we run several alternative panel regressions of abnormal discretionary accruals on female auditor variables and firm-specific controls. The results suggest that firms with female audit engagement partners are associated with smaller abnormal accruals, thereby implying that female auditors may have a constraining effect on earnings management. In general, our findings indicate that the behavioral differences between women and men may have important implications for the quality of auditing and financial reporting.

Keywords: auditor gender, female auditors, gender differences, discretionary accruals, abnormal accruals, accruals quality, earnings management

JEL Classification: M40, M42, G30