Assertiveness and Audit Quality : Archival Evidence From Big 4 Audit Partner’s Political Involvement

This paper argues that assertive audit partners deliver higher quality audits because they can perform stronger in the course of auditor-client negotiations. Borrowing from political psychology literature, I use the political involvement of individual audit partners as the proxy for assertiveness. Empirical findings from a sample of U.S listed companies audited by Big 4 audit firms during the period 2017-2019 are consistent with politically involved auditors providing on average better-quality audits. Specifically, I document that clients of politically involved auditors have lower discretionary and total accruals, are less likely to just meet their earnings benchmarks, and pay higher audit fees. The results are robust across matched and balanced samples and in the subsets of companies that have experienced events that increase the importance of auditor-client negotiations. Furthermore, I document some supportive evidence for the findings using change analysis, coefficient stability analysis, as well as fixed effects regression. The research does not claim that auditors who are not politically involved deliver low-quality audits