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Do Home-State Audit Partners Have a Mutually Beneficial Relationship with Their Clients? Evidence from Audit Quality and Auditor Dismissals

Yuzhou Chen, University of Nebraska - Lincoln

Abstract

I investigate whether a mutually beneficial relationship exists between audit partners and their clients when the engagement audit partner’s home state is the same as the client’s headquarters state (i.e., home-state audit partners). Specifically, I examine how home-state audit partners affect audit quality and auditor dismissal in this home-state relationship. I find that home-state audit partners provide higher audit quality, which benefits their home-state audit clients. I also find that these home-state audit clients are less likely to dismiss their auditors when the engagement audit partner is a home-state audit partner, suggesting a benefit from home-state audit clients to their home-state audit partners. The lower likelihood of auditor dismissal is more pronounced when the audit committee has greater accounting expertise. Overall, this study's results suggest a mutually beneficial relationship between home-state audit partners and their home-state clients.

Subject Area

Business administration

Recommended Citation

Chen, Yuzhou, "Do Home-State Audit Partners Have a Mutually Beneficial Relationship with Their Clients? Evidence from Audit Quality and Auditor Dismissals" (2022). ETD collection for University of Nebraska - Lincoln. AAI29168485.
https://digitalcommons.unl.edu/dissertations/AAI29168485

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