The Effect of Engagement Partner Visibility and Fee Pressure on Audit Quality

Abstract

Using data from Taiwan where a long history of engagement partner identities are available, we investigate why certain engagement partners exhibit a pattern of poor audit quality. Holding important engagement partner and client characteristics constant, we continue to find evidence of lower audit quality among engagement partners who have recently exhibited lower audit quality; this suggests that patterns of poor audit quality are not solely a function of partner experience or of clienteles. We examine two additional explanations for this phenomenon – engagement partner workloads and client fee pressures. We find that both partner workloads and increased fee pressure from previously non-restating clients contribute to this pattern of poor audit quality. These findings provide important new insights into why certain partners exhibit a pervasive tendency to provide lower quality audits.