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The Effect of Family Ties Between Director-Owners and Auditors on Audit Quality In Kuwait
This study examines whether family ties between companies’ director-owners and their auditors impacts audit quality in companies listed on the Kuwait Stock Exchange (KSE). I use discretionary accruals and restatements to proxy for audit quality. The sample is constructed by hand-collecting financial reports from KSE-listed companies for the period 2000-2012 (2005 - 2012 for restatements sample). I am able to identify family ties by matching the family names of director-owners who certify the financial reports to the family names of audit partners in the firms that audit these companies. My results indicate that companies whose director-owners have family ties to their auditors report higher-quality accruals, suggesting higher audit quality. The results are consistent with the following incentives to appoint family-tied auditors in Kuwait (identified through interviews with director-owners, managers, and auditors): reduce information asymmetry, implement stricter monitoring on management, enhance financial reporting quality, enhance confidentiality and trust between director-owners and auditors, facilitate communication and information flow, and protect ownership interests.^
lMarzouq, Mohammad Nasser, "The Effect of Family Ties Between Director-Owners and Auditors on Audit Quality In Kuwait" (2017). ETD collection for University of Nebraska - Lincoln. AAI10267525.