Audit Partner Signature Disclosure Effects on Non-Professional Investors’ Credibility Assessments and Liability Perceptions

Abstract

Restoring the credibility of the auditor’s report by disclosing an audit partner’s signature has been the subject of recent auditing standard setting. This study presents an experimental examination of the effect of voluntary audit partner signature disclosure on nonprofessional investor credibility assessments of auditor’s reports and perceived audit partner liability. We find that disclosing the audit partner’s signature enhances auditor’s report credibility unless obtainable information is over-endorsed by the disclosure. However, we could not detect any substantial effect of voluntary audit partner signature disclosure on perceived audit partner liability. We provide evidence consistent with source credibility theory that the audit partner’s signature is used as a heuristic cue in information processing, thereby affecting nonprofessional investor judgments. In light of the increasing interest in and reforms of the auditor’s report, our findings contribute to a decade of auditing standard setting discussions and relativize the perceived liability threats linked to audit partner related disclosures.