Does Greater Gender and Ethnic Diversity among Audit Partners Influence Office-Level Audit Personnel Retention and Audit Quality?

We examine whether greater gender and ethnic diversity of an office’s audit partners influences the retention of the office’s audit professionals and the quality of the audits conducted by the office. Using hand-collected data on audit partners, we find that greater diversity in audit office partners’ gender and ethnicity is associated with lower turnover among office audit professionals and higher office-level audit quality. Additional analyses reveal that the influence on audit quality is both direct and indirect through increased retention. Further tests to assess selection concerns provide corroborating support and reveal that the association with audit quality is incremental to, and distinct from, the effect of individual engagement partner characteristics. Collectively, the findings underscore the importance of diversity in leadership gender and ethnicity to organizational outcomes and provide important practical implications for audit firms