Does cultural similarity between CFOs and auditors impact audit quality?

• Main Author: Xiong, Xi
• Other Authors: Zhang Huai
• Format: Thesis-Doctor of Philosophy
• Language: English
• Published: Nanyang Technological University 2021
• Subjects: Business::Auditing
• Online Access: https://hdl.handle.net/10356/148127
• Institution: Nanyang Technological University

Conceptually, it is ambiguous how the cultural similarity between the CFO and the engagement partner influences audit quality. Using last names to infer cultural values, I find that the cultural similarity between the CFO and the engagement partner is associated with high audit quality. Using the exogenous change in cultural similarity as a result of normal CFO retirement, I show that the relationship between cultural similarity and audit quality is likely to be causal and unlikely driven by endogeneity. I also hypothesize and find that the positive impact of CFO-auditor cultural similarity on audit quality is more pronounced when firms have greater information asymmetry, greater information uncertainty, and weaker corporate governance. Collectively, my findings suggest that cultural similarity influences audit quality positively.