This study provides useful insights into how audit-partner quality affects engagement-level quality and underscores the importance of audit-partner identification; furthermore, this study could lead to future research which can explore whether audit-partner quality affects the cost of equity and debt capital above and beyond audit-firm and audit-client characteristics with the hopes of deepening the understanding of auditor performance and the market perception of auditor reputation at the audit-partner level.
Wang, Yanyan, Lisheng Yu, and Yuping Zhao. 2015. The Association between Audit-Partner Quality and Engagement Quality: Evidence from Financial Report Misstatements. Auditing: A Journal of Practice and Theory 34 (3): 81-111.
The findings of this study:
For more information on this study, please contact William F. Messier, Jr.
William F. Messier Jr., Thomas M. Kozloski, and Natalia Kochetova-Kozloski (2010) An Analysis of SEC and PCAOB Enforcement Actions against Engagement Quality Reviewers. AUDITING: A Journal of Practice & Theory: November 2010, Vol. 29, No. 2, pp. 233-252.
The most efficient and effective resolution of issues arising from engagement quality reviews is direct interaction between the engagement partner and the engagement quality review partner. When both parties go into the interaction with an open mind it can lead to new and innovative solutions. The involvement of other individuals in the firm does not facilitate or expedite the process of resolution. An important takeaway from the results of this questionnaire was that while the respondents indicated that almost half of the examples involved issues that had arisen in previous years, only a small minority of those same issues were considered to have potential ramifications for future years. This lack of symmetry suggests that the temporal connection of the identified issues was underestimated and suggests that this temporal connection is an important factor that should be explicitly considered in engagement quality reviews.
For more information on this study, please contact please contact Craig Emby.
Emby, C. and M. Favere-Marchesi. 2010. Review partners and engagement partners: The interaction process in engagement quality review. Auditing: A Journal of Practice and Theory 29 (2): 215-232.
The findings of this study imply that firm level expertise impacts audit quality but has a greater impact in conjunction with office level or partner level expertise. Similarly, concurring auditors have a greater impact on audit quality when their abilities are paired with those of a lead or signing partner. This study implicitly emphasizes the importance in cooperation and the sharing of intellectual resources among partners in Big 4 firms considering that expertise is not homogeneous across a firm. Additionally, this study has implications on what could result if the Public Company Accounting Oversight Board in the United States decided to require an engagement partner’s signature on the audit report.
For more information on this study, please contact Hsin-Yi Chi.
Chi, H., and C. Chin. Firm versus partner measures of auditor industry expertise and effects on auditor quality. Accounting: A Journal of Practice and Theory 30 (2): 201-229.
While research on “quality-threatening behaviors” by auditors is difficult to perform due to confidentiality constraints, the available findings suggest that audit firms can make a difference in their incidence and severity through careful attention to policies and procedures for assessing, monitoring and controlling risk of violation of professional standards. While there is likely to be greater resistance to higher quality control standards among smaller firms, research shows that audit quality concerns are greater for smaller firms and that larger firms are currently passing smaller and riskier clients to them. The authors suggest that small accounting firms can adopt strategies, like creating alliances or becoming niche providers of certain audit services, to allow them to meet this challenge.
Bedard, J.C., D.R. Deis, M.B. Curtis, and J.G. Jenkins. 2008. Risk monitoring and control in audit firms: A research synthesis. Auditing: A Journal of Practice & Theory 27 (1): 187-218.
Engagement quality review is one quality control mechanism used by public accounting firms to monitor the quality of audit engagements. In this study, the authors analyzed the concurring partner review process by reviewing six firms’ concurring partner review guidance. The authors argue that the analysis of this study provides a base for the PCAOB in setting its standard for engagement quality review.
Epps, Kathryn K.and W.F. Messier, Jr. 2007. Engagement Quality Reviews: A Comparison of Audit Firm Practices. Auditing: A Journal of Practice & Theory 26 (2): 167-181.