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

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