Female Audit Partners and Extended Audit Reporting: UK Evidence
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ORIGINAL PAPER
Female Audit Partners and Extended Audit Reporting: UK Evidence Tarek Abdelfattah1,4 · Mohamed Elmahgoub2,4 · Ahmed A. Elamer3,4 Received: 10 December 2019 / Accepted: 19 August 2020 © The Author(s) 2020
Abstract This study investigates whether audit partner gender is associated with the extent of auditor disclosure and the communication style regarding risks of material misstatements that are classified as key audit matters (KAMs). Using a sample of UK firms during the 2013–2017 period, our results suggest that female audit partners are more likely than male audit partners to disclose more KAMs with more details after controlling for both client and audit firm attributes. Furthermore, female audit partners are found to use a less optimistic tone and provide less readable audit reports, compared to their male counterparts, suggesting that behavioural variances between female and male audit partners may have significant implications on their writing style. Therefore, this study offers new insights on the role of audit partner gender in extended audit reporting. Our findings have important implications for audit firms, investors, policymakers and governments in relation to the development, implementation and enforcement of gender diversity. Keywords Auditor gender · Key audit matters · Gender differences · Extended audit reporting · Tone · Readability · UK
Introduction This study investigates how audit partner gender could influence the extent of auditor disclosure and the communication style regarding risks that are classified as key audit matters (KAMs).1 The behavioural differences between males and females have been extensively examined in the business ethics literature (Carmona et al. 2018; Kelan 2008; Qi et al. 2018). Gender-related studies in the accounting and auditing profession suggest that women tend to be more riskaverse and acting more ethically, but other studies found * Tarek Abdelfattah [email protected] Mohamed Elmahgoub [email protected] Ahmed A. Elamer [email protected] 1
Faculty of Business and Law, University of Portsmouth, Portsmouth PO1 3DE, UK
2
Birmingham City Business School, Birmingham City University, Birmingham B47BD, UK
3
Brunel Business School, Brunel University London, Kingston Lane, Uxbridge, London UB8 3PH, UK
4
Faculty of Commerce, Mansoura University, Mansoura, Egypt
no behavioural differences between genders in high-profile jobs and leadership positions (Elmagrhi et al. 2019; Lara et al. 2017; Ntim 2015; Sila et al. 2016; Zalata et al. 2019). Despite inconsistent pieces of evidence, the existing research on gender behavioural differences appears tilted in favour of the positive implications of gender diversity for auditing and financial reporting quality (Qi et al. 2018; Zalata et al. 2019). In this study, we postulate that behavioural variances between female and male in risk aversion may have significant implications for audit reporting, especially after the recent reforms. The consequences of the financial crisis i
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