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    Information in Financial Statement Misstatements at the Engagement Partner Level: A Case for Engagement Partner Name Disclosure?

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    https://poseidon01.ssrn.com/delivery.php?ID=791101027092092122084019000077104018105084007031052035109089086088105012086002016089043050055106031007050103096001079085016113025019027055033021097002089023120067055086024100069002001091110075126122093029113017080102088007004074114084009069104093009&EXT=pdf
    Permanent Link
    10.2139/ssrn.2558481
    http://hdl.handle.net/11603/4210
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    • UBalt Faculty Scholarship
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    Author/Creator
    Chi, Wuchun
    Lisic, Ling
    Myers, Linda A
    Pevzner, Mikhail
    Date
    2015
    Type of Work
    44 pages
    Text
    journal articles
    Citation of Original Publication
    Chi, Wuchun and Lisic, Ling Lei and Myers, Linda A. and Pevzner, Mikhail, Information in Financial Statement Misstatements at the Engagement Partner Level: A Case for Engagement Partner Name Disclosure? (January 2015).
    Subjects
    audit quality
    engagement partners
    misstatements
    restatements
    Abstract
    Using data from Taiwan where engagement partner names are disclosed and misstatements of clients’ annual financial statements to proxy for audit quality, we examine whether audit quality at the engagement partner level persists, and whether an engagement partner’s reputation for prior audit quality is informative about current audit quality. We find that at the engagement partner level, year t-1 misstatements made by other audit clients predict year t misstatements for clients without a history of misstatements in the preceding three years, but this effect is mitigated by engagement partner experience. In addition, we find a positive association between the incidence of restatements made by an engagement partner’s clients in the previous two or three years and the likelihood that a different client misstates in the current year, suggesting that partner-level restatements provide information about future audit quality. Finally, we find that an engagement partner’s reputation for past client misstatements (as disclosed in restatements) is associated with a higher likelihood of that partner losing existing clients and a lower likelihood of that partner attracting new audit clients. Collectively, our results suggest that engagement partner identification can reveal information that is informative about audit quality and affects stakeholder perceptions of audit quality, providing some support for the Public Company Accounting Oversight Board’s proposal to disclose the names of engagement partners in the U.S.


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    Robert L. Bogomolny Library
    University of Baltimore
    1420 Maryland Ave.
    Baltimore, MD 21201
    Email: knowledgeworks@ubalt.edu


    If you wish to submit a copyright complaint or withdrawal request, please email mdsoar-help@umd.edu.