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Partner wealth and audit quality: evidence from the United States

Author

Listed:
  • John Xuefeng Jiang

    (Michigan State University)

  • Shaohua He

    (Lancaster University)

  • K. Philip Wang

    (Warrington College of Business, University of Florida)

Abstract

Using the market values of audit partners’ houses as a measure of their personal wealth, we find that wealthier U.S. partners provide higher-quality audits, as evidenced by fewer material restatements, fewer material SEC comment letters, and higher audit fees. A battery of falsification tests shows that these findings are not driven by the matching of wealthier partners with clients with higher financial reporting quality. Our additional analyses suggest two explanations: greater personal wealth both incentivizes partners to exert more effort in delivering high-quality audits and reveals partners’ audit competence.

Suggested Citation

  • John Xuefeng Jiang & Shaohua He & K. Philip Wang, 2025. "Partner wealth and audit quality: evidence from the United States," Review of Accounting Studies, Springer, vol. 30(1), pages 702-737, March.
    • Handle: RePEc:spr:reaccs:v:30:y:2025:i:1:d:10.1007_s11142-024-09828-6
    DOI: 10.1007/s11142-024-09828-6
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    More about this item

    Keywords

    Individual partner; Personal wealth; House value; Audit quality;
    All these keywords.

    JEL classification:

    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

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