The Effect of the Engagement Partner-Client Economic Bond on Audit Quality in the UK

50 Pages Posted: 15 Oct 2020

See all articles by Kwadwo Boateng

Kwadwo Boateng

Heriot-Watt University

Mustafa Caglayan

Heriot-Watt University - School of Management and Languages

Christopher K. M. Pong

Heriot-Watt University - School of Management and Languages

Date Written: April 5, 2020

Abstract

This study examines whether (1) high fee-paying clients consider engagement partner quality in auditor appointments and (2) engagement partners compromise their independence for economically important clients. Employing a UK setting where the lead audit engagement partner is identified, we find that while engagement partners influence audit outcomes, clients do not pay above expected audit fees either to select low-quality partners to enable them to manage their earnings or high-quality partners to signal the strength of their financial statements. We also find no evidence to suggest that partners compromise their independence for economically important clients, regardless of the possible rewards attached to how much revenue they generate. Together, we surmise that the increased regulation of partner activities and improved corporate governance, in the UK, has lessened concerns regarding excessive fees and low audit quality.

Keywords: engagement partner, audit fees, audit quality, client importance, auditor-client economic bond

JEL Classification: M42

Suggested Citation

Boateng, Kwadwo and Caglayan, Mustafa and Pong, Christopher K.M., The Effect of the Engagement Partner-Client Economic Bond on Audit Quality in the UK (April 5, 2020). Available at SSRN: https://ssrn.com/abstract=3599967 or http://dx.doi.org/10.2139/ssrn.3599967

Kwadwo Boateng

Heriot-Watt University ( email )

Riccarton
Edinburgh EH14 4AS, Scotland EH14 1AS
United Kingdom

Mustafa Caglayan

Heriot-Watt University - School of Management and Languages ( email )

Edinburgh EH14 4AS, Scotland
United Kingdom

Christopher K.M. Pong (Contact Author)

Heriot-Watt University - School of Management and Languages ( email )

Edinburgh EH14 4AS, Scotland
United Kingdom

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

Paper statistics

Downloads
16
Abstract Views
130
PlumX Metrics