Implications of Prior Joint Work Experience Between Engagement and Review Partners for Audit Quality

We examine whether cooperation between an engagement audit partner and a quality review partner affects audit quality. Using China data, where an audit report is required to be signed by an engagement audit partner and a quality review partner, we find that the probability of auditors issuing a modified audit opinion increases, discretionary accruals decrease, and audit delays decrease as cooperation between the two partners increases. Our findings are robust to controlling for a number of firm and auditor characteristics, using alternative variable specifications, and running seemingly unrelated regressions. Collectively, our results suggest that cooperation experience between an engagement partner and a review partner increases audit quality by improving the efficiency of audit engagements.