Diversity of Signing Auditors and Audit Quality

Auditing: A Journal of Practice & Theory, Forthcoming

55 Pages Posted: 5 Sep 2018 Last revised: 30 Jan 2021

See all articles by Chang He

Chang He

Xi'an Jiaotong University (XJTU)

Chao Kevin Li

University of New South Wales (UNSW)

Gary S. Monroe

University of New South Wales (UNSW) - Australian School of Business

Yi Si

The School of Management, Xi'an Jiaotong University

Date Written: August 26, 2018

Abstract

Using data for listed firms in China, where two auditors sign the audit report, we examine whether the diversity of signing auditors’ characteristics affects audit quality. We find a positive association between diversity and audit quality, consistent with the notion that diversity facilitates team performance. Further analyses show there is a stronger association between cognitive, rather than demographic, diversity of signing auditors and audit quality. Our results are robust to the inclusion of client firm and engagement auditor fixed effects. Cross-sectional results indicate stronger effects of the cognitive diversity of signing auditors on audit quality in complex, opaque, less important clients or firms without industry specialist auditors. Findings from our study suggest that audit firms should allocate staff to audit teams in a manner that results in cognitively diverse audit teams because such teams are more likely to deliver high quality audits.

Keywords: Signing auditors; Cognitive Diversity; Demographic Diversity; Audit quality

JEL Classification: M42

Suggested Citation

He, Chang and Li, Chao and Monroe, Gary S. and Si, Yi, Diversity of Signing Auditors and Audit Quality (August 26, 2018). Auditing: A Journal of Practice & Theory, Forthcoming, Available at SSRN: https://ssrn.com/abstract=3239092 or http://dx.doi.org/10.2139/ssrn.3239092

Chang He

Xi'an Jiaotong University (XJTU) ( email )

26 Xianning W Rd.
Xi'an Jiao Tong University
Xi'an, Shaanxi 710049
China

Chao Li

University of New South Wales (UNSW) ( email )

high street
High St
sydney, NSW 2052
Australia

Gary S. Monroe

University of New South Wales (UNSW) - Australian School of Business ( email )

UNSW Business School
High St
Sydney, NSW 2052
Australia
+61293856443 (Phone)

Yi Si (Contact Author)

The School of Management, Xi'an Jiaotong University ( email )

No.28 Xianning West Road
Xi'an, Shaanxi 710049
China

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
325
Abstract Views
1,738
rank
119,628
PlumX Metrics