Diversity of Signing Auditors and Audit Quality
Auditing: A Journal of Practice & Theory, Forthcoming
55 Pages Posted: 5 Sep 2018 Last revised: 30 Jan 2021
Date Written: August 26, 2018
Using data for listed firms in China, where two auditors sign the audit report, we examine whether the diversity of signing auditors’ characteristics affects audit quality. We find a positive association between diversity and audit quality, consistent with the notion that diversity facilitates team performance. Further analyses show there is a stronger association between cognitive, rather than demographic, diversity of signing auditors and audit quality. Our results are robust to the inclusion of client firm and engagement auditor fixed effects. Cross-sectional results indicate stronger effects of the cognitive diversity of signing auditors on audit quality in complex, opaque, less important clients or firms without industry specialist auditors. Findings from our study suggest that audit firms should allocate staff to audit teams in a manner that results in cognitively diverse audit teams because such teams are more likely to deliver high quality audits.
Keywords: Signing auditors; Cognitive Diversity; Demographic Diversity; Audit quality
JEL Classification: M42
Suggested Citation: Suggested Citation