The impact of auditors’ gender on the quality of financial reporting: a comparative study of auditors with accounting expertise

The current research aims to investigate the gender roles of accounting financial expertise (AFE) auditors for the accuracy of financial reporting. By utilizing four measures, namely two forms of real earnings management and two forms of discretionary accruals, we have developed a comprehensive index referred to as the Index of Financial Reporting Quality (IFRQ). Financial statistics were obtained from the annual COMPUSTAT database using Wharton Research Data Services (WRDS). Information related to audit services and accounting financial expertise was acquired from the ‘Institutional Shareholder Services’ (ISS) for the period spanning from 2003 to 2019. Possible endogeneity controlled through the Propensity Score Matching (PSM) technique, i.e. firm-level characteristics between gender diverse auditors and financial reporting quality. Moreover, Generalized Method of Moments (GMM) econometric technique was utilized in order to derive precise and reliable coefficient values. Most important and robust conclusion of the study is that the gender of the auditor matters greatly in impacting the quality of financial reporting. The findings of the present research suggest that the quality of financial reports is enhanced when women with accounting knowledge serve on the audit committee. This study highlights the significance of diversity, not only as a matter of ethical consideration, but also as a concrete advantage in the endeavor to enhance the quality of financial reporting.