Audit firm office-level style and its impact on audit engagement partners: Evidence from internal control over financial reporting attestation outcomes

This paper investigates the influence of accounting firm office-level style on internal control over financial reporting (ICFR) audit outcomes. It also shows the joint effect of audit firm office-level style and engagement partner individual-level characteristics on ICFR attestation results. Using the propensity of issuing adverse ICFR attestation opinions as a proxy of office-level style, I find that some audit offices are prone to give more adverse internal control audit opinions than their peers, even when all these offices are in the same accounting firm. I also find that inexperienced audit partners are less likely to align with the general ICFR attestation style in their offices. Moreover, for clients that contribute the most fee revenues to each audit partner, the office-level style makes them more likely to receive adverse ICFR opinions. Additional analyses demonstrate that non-audit services (NAS) and audit partner mandatory rotation exert limited impact on ICFR audit in the circumstance of office styles. The findings of this paper shed light on the drivers of ICFR audit results, and highlight the importance of audit partner individual-level factors in assessing clients’ internal control weakness.

Embargo status: Restricted until 06/2172. To request the author grant access, click on the PDF link to the left.