Abstract
This study investigates whether audit partner gender is associated with the extent of auditor disclosure and the communication style regarding risks of material misstatements that are classified as key audit matters (KAMs). Using a sample of UK firms during the 2013–2017 period, our results suggest that female audit partners are more likely than male audit partners to disclose more KAMs with more details after controlling for both client and audit firm attributes. Furthermore, female audit partners are found to use a less optimistic tone and provide less readable audit reports, compared to their male counterparts, suggesting that behavioural variances between female and male audit partners may have significant implications on their writing style. Therefore, this study offers new insights on the role of audit partner gender in extended audit reporting. Our findings have important implications for audit firms, investors, policymakers and governments in relation to the development, implementation and enforcement of gender diversity.
Highlights
This study investigates how audit partner gender could influence the extent of auditor disclosure and the communication style regarding risks that are classified as key audit matters (KAMs)
Number of KAMs, length of KAMs’ disclosure, extended audit reports (EARs) tone, and EAR readability are the dependent variables in columns 1–6 of Table 5
The effects of female audit partners on risk, auditor judgements, and audit quality have been fairly documented, the literature is silent on how auditor gender influences audit reporting
Summary
This study investigates how audit partner gender could influence the extent of auditor disclosure and the communication style regarding risks that are classified as key audit matters (KAMs). The behavioural differences between males and females have been extensively examined in the business ethics literature (Carmona et al 2018; Kelan 2008; Qi et al 2018). This study investigates how audit partner gender could influence the extent of auditor disclosure and the communication style regarding risks that are classified as key audit matters (KAMs).. The behavioural differences between males and females have been extensively examined in the business ethics literature (Carmona et al 2018; Kelan 2008; Qi et al 2018). Gender-related studies in the accounting and auditing profession suggest that women tend to be more riskaverse and acting more ethically, but other studies found. The consequences of the financial crisis included a pressing need to disclose more client and audit-specific information (PCAOB 2016). New regulations and practices followed, including a move towards much more detailed audit reports. The UK mandated extended audit reports (EARs) in 2013. KAMs are essential to EARs, and auditors must use their
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