Does Visibility of an Engagement Partner’s Association with Recent Client Restatements Increase Fee Pressures from Non-Restating Clients?

70 Pages Posted: 8 Sep 2017 Last revised: 10 Mar 2021

See all articles by Wuchun Chi

Wuchun Chi

National Chengchi University (NCCU) - Department of Accounting

Ling Lei Lisic

Virginia Polytechnic Institute & State University - Pamplin College of Business

Linda A. Myers

University of Tennessee, Haslam College of Business, Accounting and Information Management

Mikhail Pevzner

University of Baltimore - Merrick School of Business

Timothy A. Seidel

Brigham Young University

Date Written: March 2021

Abstract

We examine whether engagement partners who have recently been associated with client restatements experience increased audit fee pressures from their non-restating clients. Using data from the United States (U.S.) and Taiwan, we find evidence of lower audit fees among non-restating companies whose audit engagement partner was recently associated with another client’s restatement. These findings are generally strongest when the partner-associated restatement is more prominent or severe, and in the U.S., when non-restating clients are in the same industry as the restating client. Although we find very limited evidence that fee pressures lead to lower quality audits for these partners’ other clients in Taiwan, we find that when the partner-associated restatement is more prominent or severe, fee pressures negatively impact audit quality in the U.S. These findings provide further insight on the impact of engagement partner disclosure for audit quality.

Keywords: audit quality, engagement partners, audit partners, audit fee pressure

JEL Classification: M41, M42

Suggested Citation

Chi, Wuchun and Lisic, Ling Lei and Myers, Linda A. and Pevzner, Mikhail and Seidel, Timothy A., Does Visibility of an Engagement Partner’s Association with Recent Client Restatements Increase Fee Pressures from Non-Restating Clients? (March 2021). Available at SSRN: https://ssrn.com/abstract=3032610 or http://dx.doi.org/10.2139/ssrn.3032610

Wuchun Chi

National Chengchi University (NCCU) - Department of Accounting ( email )

No. 64, Sec 2
Chih-Nan Road
Wenshan 116, Taipei
Taiwan
886-2-29393091-81031 (Phone)
886-2-29387113 (Fax)

HOME PAGE: http://www3.nccu.edu.tw/~wchi/

Ling Lei Lisic

Virginia Polytechnic Institute & State University - Pamplin College of Business ( email )

3007 Pamplin Hall
Blacksburg, VA 24061
United States

Linda A. Myers

University of Tennessee, Haslam College of Business, Accounting and Information Management ( email )

Knoxville, TN
United States

Mikhail Pevzner

University of Baltimore - Merrick School of Business ( email )

1420 N. Charles St.
Baltimore, MD 21201-5779
United States

Timothy A. Seidel (Contact Author)

Brigham Young University ( email )

Provo, UT 84602
United States

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