Audit quality and the audit partner effect : Evidence from European listed companies

The main objective of this study is to provide evidence on the differences in audit quality amongst audit partners. I attribute these dissimilarities to (i) differences in the audit risk perception and the risk appetite of individual audit partners and (ii) to differences in the personal business case of audit partners. As a result, three audit partner archetypes have been identified: liberal, high quality and conservative. This paper will provide evidence that 50% of the audit partners (53% of the local offices) deliver, on average, an audit quality that is biased towards conservatism or liberalism. Moreover, the results indicate that 51% of the audit partners (49% of the local offices) deliver a level of audit quality that differs significantly from the audit firm’s average level of audit quality. This partner effect is observed in all large audit firms included in the sample. In addition, the results suggest that the local office of the audit firm has a significant effect on the level of audit quality delivered by the local audit partners. Nevertheless, even at the local office level, 30% of the local audit partners deliver a significantly different level of audit quality.