Audit Partner Independence: A Network Perspective

Accounting

Speaker:Joanne Horton, University of Exeter
Website: http://business-school.exeter.ac.uk/about/whoswho/index.php?web_id=joanne_horton
Date: Wednesday 26 February 2014
Time: 12:00
Location: Building:One, Marchant Syndicate Room A

Further details

 

 

Audit Partner Independence: A Network Perspective

 

 

Joanne Horton and Anthony Wood

 

 

Abstract

 

 

We provide a partner level analysis on the association between the network position of an audit partner and audit quality and fees. Network analysis emphasizes that power is inherently relational, an individual does not have power in the abstract; they have power because they can dominate others (Hammeman and Riddle, 2005). From an audit partner perspective having the ability to influence others or not be influenced by others is the major condition for independence. We therefore argue that holding a network position, which provides the audit partner with greater social influence, enhances their independence and enables them to provide better quality audits. Using a sample of French audit partners we find that their network derived social influence is positively associated with various measures of audit quality and audit fees. Moreover we find that the audit partner’s social influence decreases if they have greater levels of tenure and high levels of economic bonding with their clients. Collectively, these results contribute to our understanding of partner-level independence and behavior.