The Effect of Audit Partner Busyness on Audit Quality：Based on Chinese Audit Partners’ Experience and Educational Background
Asian Tax Journal Vol. 22 No. 2 (2021), pp. 251-278
Abstract
Regulators and investors have recognized that individual audit partners play a central role in providing credible financial statements and have shown extensive attention to individual audit partners’ characteristics. PCAOB expressed a long－held concern that audit partner busyness could decrease the audit quality, and careful monitoring is necessary. However, the relationship between audit partner busyness and audit quality, and the impact of individual audit partners’ characteristics on this relationship is still a priori because of data limitations. This paper examines the relationship between audit partner busyness(APB) on audit quality and whether there are systematic differences in this relationship depending on individual audit partners’ experience and educational background (major, prestigious university, academic qualifications). Using a sample of A－share listed companies in the Chinese stock market from 2017 to 2018, we find that there is a negative association between APB, measured as the number of clients of an audit partner, and audit quality, measured as the absolute value of discretionary accruals, consistent with regulators’ concerns that APB dissipates audit effort and thus, compromises audit quality. We also find that experience and educational background have no control effect on the negative relationship between APB and audit quality when APB is too low or too high. However, audit partners’ experience and educational background ease the negative effect of APB on audit quality if APB is not extreme. Specifically, audit partners majoring in accounting, financial management, business management, and audit partners from the prestigious university could ease audit quality deterioration due to APB. On the other hand, audit partners’ academic qualifications are not significantly related. Our findings contribute to policy implications for regulators. Our study also suggests that the accounting firm should pay much attention to audit partner busyness and that it needs to reasonably allocate human resources to ensure that the distribution of audit partners’ work is appropriate to improve audit quality.
Keywords
- Audit Partner Busyness
- Experience
- Education
- Audit Quality
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