Professional Documents
Culture Documents
Tammy Whitehouse
October 22, 2013
That's the finding of academic research being presented this week at aconference of the Canadian
Academic Accounting Association. The study of seven years worth of audit work performed by Swedish
affiliates of Big 4 firms found that aggressive and conservative audit reporting styles could be tracked to
individual engagement partners, and the patterns were consistent across engagement partners' clients.
The study also shows that the market penalizes companies that are susceptible to aggressive audit partner
reporting decisions.
Titled Does the Identity of Engagement Partners Matter? An Analysis of Audit Partner Reporting
Decisions, the study is authored by Robert Knechel at the University of Florida and two co-authors at
universities in Finland and the Netherlands. The authors say the results of the aggressive or conservative
reporting styles are systematic partner attributes that are not randomly distributed across audit
engagements.
James Doty, chairman of the Public Company Accounting Oversight Board, has already latched on to the
research as evidence that disclosure of the name of the engagement partner on U.S. public company
audits would benefit investors. The PCAOB issued a proposal in 2011 calling for the name of audit
engagement partners to be included in audit reports and is expected to issue a revised proposal by the end
of the first quarter. “The market wants to know whether, in fact, the partner that's on their account is
someone who has a long history of bungling audits, restatements that have trailed or followed him or her,
or whether this auditor has a history of making tough calls and being an objective auditor,” he said in
Some auditors have protested having their names included in audit reports, asserting it would heighten
their liability and diminish the investor's understanding that the audit is a group effort performed by
many different people. Some audit firms have lobbied the PCAOB to consider instead requiring audit
firms to link engagement partners with specific audit engagements in a filing with the PCAOB that would
results provide important insights into the role of individual audit partners in influencing audit reporting
decisions. “Specifically, our results imply that the identity of the engagement partner matters to the