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

See all articles by Feng Guo

Feng Guo

Iowa State University - Department of Accounting and Finance

Ling Lei Lisic

Virginia Polytechnic Institute & State University - Pamplin College of Business

Jeffrey Pittman

Memorial University of Newfoundland (MNU) - Faculty of Business Administration

Timothy A. Seidel

Brigham Young University

Mi Zhou

Virginia Commonwealth University

Date Written: February 1, 2019

Abstract

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

Guo, Feng and Lisic, Ling Lei and Pittman, Jeffrey A. and Seidel, Timothy A. and Zhou, Mi, 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 (February 1, 2019). Available at SSRN: https://ssrn.com/abstract=3331272

Feng Guo

Iowa State University - Department of Accounting and Finance ( email )

College of Business
Ames, IA 50011-2063
United States

Ling Lei Lisic

Virginia Polytechnic Institute & State University - Pamplin College of Business ( email )

1016 Pamplin Hall
Blacksburg, VA 24061
United States

Jeffrey A. Pittman (Contact Author)

Memorial University of Newfoundland (MNU) - Faculty of Business Administration ( email )

St. John's, Newfoundland A1B 3X5
Canada
709-737-3100 (Phone)
709-737-7680 (Fax)

Timothy A. Seidel

Brigham Young University ( email )

Provo, UT 84602
United States

Mi Zhou

Virginia Commonwealth University ( email )

301 West Main Street
Richmond, VA 23284
United States

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