Fool Me Once, Shame on You; Fool Me Twice, Shame on Me: The Impact of Audit Partners’ First-Hand Experience with Arthur Andersen’s Demise on Their Style
Posted: 21 Feb 2019
Date Written: February 1, 2019
The increase in disclosure about the persons conducting audits has led to a steep rise in research examining the role that individual audit partner styles play in audit outcomes. Although recent evidence suggests that individual audit partner styles explain a substantial portion of the variation in audit quality proxies, much less is known about what determines an audit partner’s style. Psychology and behavioral economics theories hold that an individual’s experiences can have enduring impacts on subsequent behavior. We examine whether auditors’ direct experience with Arthur Andersen’s collapse affects their auditing style. We find that audit partners who experienced Andersen’s demise first-hand impose stricter monitoring of the financial reporting process.
Keywords: Audit partner styles, Arthur Andersen, audit quality, imprinting
JEL Classification: M41, M42
Suggested Citation: Suggested Citation