Keywords

home bias, place attachment, place identity, audit partners, auditor leniency

Abstract

We investigate whether audit partners exhibit greater leniency towards audit clients located in their childhood or pre-professional home state. While prior research has examined the audit quality effects of geographic distance between an auditor and client as well as auditors’ social ties to company management or directors, this study uniquely examines auditors’ psychological affinity to places rather than people. Using hand-collected data on audit partners, company managers, and directors, we find evidence of partners exhibiting hometown bias in the form of greater leniency towards clients’ opportunistic reporting. However, we find no evidence to suggest that these psychological biases affect audit reporting judgments requiring national office consultation, highlighting the importance of quality controls in mitigating individual auditor biases. Further, we find a client preference toward audit partners with hometown ties, underscoring the importance of these findings for audit firms, audit committees, and regulators.

Original Publication Citation

“Do audit partners exhibit hometown bias?” with Yuzhou Chen and Aleksandra Zimmerman. Under review at Accounting, Organizations and Society.

Document Type

Peer-Reviewed Article

Publication Date

2024

Publisher

Accounting, Organizations and Society

Language

English

College

Marriott School of Business

Department

Ancient Scripture

University Standing at Time of Publication

Full Professor

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