Do Investors Care Who Did the Audit? Evidence from Form AP
63 Pages Posted: 14 Aug 2018 Last revised: 11 Sep 2020
Date Written: August 2020
In early 2017, the PCAOB mandated the disclosure of audit participants, including the lead audit partner and other audit firms participating in the audit (“outside auditors”). In this study, we leverage this unique setting to examine whether investors find auditor identity useful. Using trading volume, absolute abnormal returns, and bid-ask spreads, we find little evidence of an investor response following the disclosure of partner identity or outside auditor participation in the first three years of the requirement. We also examine instances where these disclosures are most likely to be informative (e.g., partners associated with restatements or outside auditors with PCAOB deficiencies) and continue to find no significant investor response. Taken together, we find little evidence that capital markets respond to partner and outside auditor identity in the United States.
Keywords: Audit Partners, Capital Markets, Form AP
JEL Classification: M40, M42, M48
Suggested Citation: Suggested Citation