Audit Partner Identification, Assignment, and the Labor Market for Audit Talent
70 Pages Posted: 21 Aug 2019 Last revised: 20 Jun 2022
Date Written: June 17, 2022
Conventional wisdom suggests that audit partner name disclosure benefits investors by informing them about engagement partners’ performance. However, such public disclosure of the identity of the audit partners may also intensify competition for audit talent in the labor market. To examine the economic consequences of audit partner identification, we build a two-period model in which an audit firm matches partners to clients. The audit partner identification broadens a partner’s outside options in the labor market, making talent retention more costly. If the talent-retention cost is substantial, audit partner identification may cause an audit firm to adjust its partners’ compensation packages and mismatch the partners and clients, and may lead to lower audit quality. Overall, we identify unintended consequences of audit partner identification by examining its impact on the audit labor market and provide economic reasons for the mixed empirical findings.
Keywords: audit partner identification, client-partner matching, partner compensation, audit quality, audit labor markets
JEL Classification: M42, M48
Suggested Citation: Suggested Citation