The Effects of Audit Partners on Financial Reporting: Evidence from U.S. Bank Holding Companies

45 Pages Posted: 21 Jul 2022

See all articles by Gauri Bhat

Gauri Bhat

Southern Methodist University (SMU) - Accounting Department

Hemang Desai

Southern Methodist University (SMU) - Accounting Department

W. Scott Frame

Structured Finance Association

Christoffer Koch

International Monetary Fund (IMF)

Erik J. Mayer

University of Wisconsin-Madison, Finance Department

Date Written: July 1, 2022

Abstract

This paper uses confidential data on audit engagement partner names from regulatory filings of bank holding companies (BHC) to investigate whether partners display individual style that affects the financial reporting of the BHCs. We focus on loan loss provisioning. We construct an audit partner-BHC matched panel data set that enables us to track different partners across different BHCs over time. We employ two empirical approaches to investigate partner style. The first approach tests whether partner fixed effects are statistically significant in loan loss provisioning models. The second approach tests whether a partner’s history of loan loss provisioning predicts future practices for the same partner. Our empirical evidence does not support systematic differences in loan loss provisioning across audit engagement partners, suggesting that the audit firm’s standards and quality control constrain personal partner style.

Keywords: Accounting, Banking, Audit Partner Names, Audit Engagement, PCAOB

JEL Classification: G21, M42

Suggested Citation

Bhat, Gauri and Desai, Hemang and Frame, W. Scott and Koch, Christoffer and Mayer, Erik J., The Effects of Audit Partners on Financial Reporting: Evidence from U.S. Bank Holding Companies (July 1, 2022). FRB of Dallas Working Paper No. 2209, Available at SSRN: https://ssrn.com/abstract=4168495 or http://dx.doi.org/10.24149/wp2209

Gauri Bhat (Contact Author)

Southern Methodist University (SMU) - Accounting Department ( email )

United States

Hemang Desai

Southern Methodist University (SMU) - Accounting Department ( email )

United States
214-768-3185 (Phone)
214-768-4099 (Fax)

W. Scott Frame

Structured Finance Association ( email )

1776 I Street NW
#501
Washington, DC 20006
United States

Christoffer Koch

International Monetary Fund (IMF) ( email )

700 19th Street, N.W.
Washington, DC 20431
United States

Erik J. Mayer

University of Wisconsin-Madison, Finance Department ( email )

975 University Avenue
Madison, WI 53706
United States

HOME PAGE: http://https://sites.google.com/site/erikjmayer/

Do you have negative results from your research you’d like to share?

Paper statistics

Downloads
89
Abstract Views
417
Rank
504,314
PlumX Metrics