Affiliated Former Partners on the Audit Committee: Influence on the Auditor-Client Relationship and Audit Quality:

Posted: 6 Aug 2015 Last revised: 7 Oct 2018

See all articles by Brant E. Christensen

Brant E. Christensen

University of Oklahoma

Thomas C. Omer

University of Nebraska at Lincoln - School of Accountancy

Marjorie K. Shelley

University of Nebraska at Lincoln - School of Accountancy

Paul A. Wong

University of California, Davis - Graduate School of Management

Date Written: October 1, 2018

Abstract

Researchers and practitioners have expressed the need to understand better the interactions between audit committees and auditors and how these interactions affect audits. Former partners affiliated with the external auditor and serving on the audit committee are a subset of audit committee members who can affect the audit. Consistent with social identity theory, we find that companies with an affiliated partner on their audit committee are less likely to dismiss the member’s former firm than companies without the affiliation. Further, we found improved audit quality and increased effectiveness of auditor effort when affiliated partners serve on the audit committee. Finally, this quality improvement occurs contemporaneously with a reduction in audit fees and time spent on fieldwork, suggesting increased efficiency. Our study provides evidence that affiliated former partners on audit committees extend the tenure of the auditor-client relationship while also improving audit processes and outcomes.

Keywords: Audit committee, former audit partners, audit firm, audit firm dismissals, social identity theory, audit quality

JEL Classification: M4, M42, G3

Suggested Citation

Christensen, Brant E. and Omer, Thomas C. and Shelley, Marjorie and Wong, Paul A., Affiliated Former Partners on the Audit Committee: Influence on the Auditor-Client Relationship and Audit Quality: (October 1, 2018). Auditing: A Journal of Practice & Theory, Forthcoming. Available at SSRN: https://ssrn.com/abstract=2639854 or http://dx.doi.org/10.2139/ssrn.2639854

Brant E. Christensen

University of Oklahoma ( email )

Norman, OK 73019-4004
United States

Thomas C. Omer

University of Nebraska at Lincoln - School of Accountancy ( email )

307 College of Business Administration
Lincoln, NE 68588-0488
United States

Marjorie Shelley

University of Nebraska at Lincoln - School of Accountancy ( email )

307 College of Business Administration
Lincoln, NE 68588-0488
United States

Paul A. Wong (Contact Author)

University of California, Davis - Graduate School of Management ( email )

One Shields Avenue
Davis, CA 95616
United States

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