The Effect of Audit Partner Diversity on Audit Quality: Evidence from China

Abacus, Forthcoming.

Posted: 22 Dec 2021

See all articles by Kevin Koh

Kevin Koh

Nanyang Technological University (NTU) - Nanyang Business School

Li Li

University of International Business and Economics (UIBE)

Xuejiao Liu

University of International Business and Economics

Chunfei Wang

Central University of Finance and Economics (CUFE)

Date Written: December 20, 2021

Abstract

This study examines the effects of audit partner diversity on audit quality. Using a sample of Chinese listed companies from 2004 to 2018, we find that audit quality is positively associated with audit partner diversity in educational background, gender, and generational cohort. These findings suggest that diverse partner teams outperform homogenous teams and support the information perspective that audit partner diversity produces different viewpoints and perspectives, thus reducing judgment biases and leading to higher audit quality. Furthermore, we find that client information asymmetry, auditor task motivation, and task ability play a moderating role in reinforcing the positive effects of audit partner diversity on audit quality. Our findings provide practical implications for audit firm personnel dispatching and team formation, and heighten the need to integrate team dynamics in the audit quality framework.

Keywords: audit partner diversity, audit quality, client information asymmetry, auditor task motivation, auditor task ability, audit team formation

JEL Classification: M42

Suggested Citation

Koh, Kevin and Li, Li and Liu, Xuejiao and Wang, Chunfei, The Effect of Audit Partner Diversity on Audit Quality: Evidence from China (December 20, 2021). Abacus, Forthcoming., Available at SSRN: https://ssrn.com/abstract=3991471

Kevin Koh

Nanyang Technological University (NTU) - Nanyang Business School ( email )

S3-B2C-96, Nanyang Avenue
Nanyang Business School , NTU
Singapore, 639798
Singapore
(+65) 6790 4096 (Phone)

Li Li (Contact Author)

University of International Business and Economics (UIBE) ( email )

10, Huixin Dongjie
Changyang District
Beijing, Beijing 100029
China

Xuejiao Liu

University of International Business and Economics ( email )

Beijing, Beijing
China

Chunfei Wang

Central University of Finance and Economics (CUFE) ( email )

39 South College Road
Haidian District
Beijing, Beijing 100081
China
+8613426475019 (Phone)

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