Partner wealth and audit quality : evidence from the United States

He, Shaohua and Jiang, John X. and Wang, K. Philip (2024) Partner wealth and audit quality : evidence from the United States. Review of Accounting Studies. ISSN 1380-6653

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Abstract

Using the market values of audit partners’ houses as a measure of their personal wealth, we fnd that wealthier U.S. partners provide higher-quality audits, as evidenced by fewer material restatements, fewer material SEC comment letters, and higher audit fees. A battery of falsifcation tests shows that these fndings are not driven by the matching of wealthier partners with clients with higher fnancial reporting quality. Our additional analyses suggest two explanations: greater personal wealth both incentivizes partners to exert more efort in delivering high-quality audits and reveals partners’ audit competence