Gender Diversity in Audit Partners and Audit Efforts

Veronica Tibiletti,Stefano Azzali,Tatiana Mazza

doi:10.5539/ijbm.v16n4p96

Abstract

The research uses regression models and panel data related to audit fees, audit hours and corporate governance. The sample of listed firms yields 751 firms-years observations for the period 2010-2018. We study how gender diversity among audit partners, Chief Executive Officers, and Boards of Directors impact on audit fees and audit hours. We focus on the interaction between auditors and management. We find that female audit partners is associated with lower audit fees and audit hours. Next, we find that female audit partner significantly affects the association with the audit efforts in interaction with management, but when the audit partner is male, audit efforts are also determined by the female representation on the Board of Directors. &nbsp;We contribute to literature on the effects of gender diversity in auditing and corporate governance. We also enrich the concept of audit efforts by including audit hours as well as audit fees. Finally, the research answers the call for empirical study on the effects of gender diversity in management-auditor interaction.

Highlights

On the basis of prior literature from the perspectives of demand and supply of audit services (Hay et al, 2006, Hardies et al, 2015, Ittonen et al, 2012), we develop the following hypotheses: Gender diversity in audit partners is associated with audit fees and audit hours (H1); Gender diversity in Chief Executive Officers (CEO)/ Board of Directors (BoD) is associated with audit fees and audit hours (H2); Different genders among auditors and CEO, audit partners and CEOs significantly affect the association with audit fees/audit hours (H3a); Different genders among auditors and BoD, audit partners and BoD significantly affect the association with audit fees/audit hours (H3b)
This means that female audit partners, perhaps thanks to their competencies, positively affect the earnings quality of the financial reporting and, through their better communication and teamwork skills are associated with lower audit fees and use lower audit hours than male audit partners
We find consistent results: both audit fees and audit hours are lower for female audit partners

Summary

Introduction

This paper studies the effects of auditor gender on audit efforts (audit fees and audit hours), which is an interesting topic for five main reasons. 1) From the academic point of view, there is very little research on this kind of association, despite increasing interest in the phenomenon. 2) There is no existing literature on the association between gender diversity in auditing and management and audit hours. 3) There is no clear theoretical explanation of effects identified in previous research, and the literature presents conflicting results (Hay et al, 2006, Hardies et al, 2015, Ittonen et al, 2012). 4) It may be possible for professionals (clients, auditors, and consultants) to improve performance by taking into account the effects of gender diversity on audit efforts. 5) This study enables regulators to evaluate the effect of gender quotas and whether it is useful to extend them to auditors.We investigate a sample of listed companies from Italy for the period 2010 – 2018. This paper studies the effects of auditor gender on audit efforts (audit fees and audit hours), which is an interesting topic for five main reasons. 2) There is no existing literature on the association between gender diversity in auditing and management and audit hours. 3) There is no clear theoretical explanation of effects identified in previous research, and the literature presents conflicting results (Hay et al, 2006, Hardies et al, 2015, Ittonen et al, 2012). The final sample includes 95 firms and 751 firms-years observations, starting from the year in which the gender quota on boards of directors was first regulated in Italy. The research requires extensive hand collection of data: data from the corporate governance reports of listed firms; data on audit partners, audit hours and audit fees from the shareholder meeting minutes, financial reporting, and databases of Italian auditors. On the basis of prior literature from the perspectives of demand and supply of audit services (Hay et al, 2006, Hardies et al, 2015, Ittonen et al, 2012), we develop the following hypotheses: Gender diversity in audit partners is associated with audit fees and audit hours (H1); Gender diversity in Chief Executive Officers (CEO)/ Board of Directors (BoD) is associated with audit fees and audit hours (H2); Different genders among auditors and CEO, audit partners and CEOs significantly affect the association with audit fees/audit hours (H3a); Different genders among auditors and BoD, audit partners and BoD significantly affect the association with audit fees/audit hours (H3b)

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Conclusion