Auditor Attributes and Audit Effectiveness Through the Lens of Accounting Errors: Evidence from Australia

Abstract

This study investigates the impact of auditors’ attributes at both firm and partner levels, including industry specialization, tenure, and switching, on audit effectiveness and the likelihood of accounting errors. Drawing on specialization theory and learning curve theory, we apply logistic regression analysis to a carefully curated dataset of 266 Australian companies listed on the ASX 300 over an 11-year period. Our findings indicate that audit firm– and partner-level industry specialization is associated with a reduced probability of accounting errors, even after we control for other determinants of misstatements. Additionally, longer audit firm and partner tenure is negatively related to accounting errors, whereas partner-level auditor switching increases the likelihood of misstatements. We further determine that strong governance and effective audit committees mitigate accounting errors, reinforcing the role of firm- and partner-level expertise in enhancing audit quality. These results have important implications for policymakers and regulators seeking to strengthen audit effectiveness at both firm and partner levels. Our findings are robust to additional analyses and sensitivity tests, confirming the significance of auditor expertise in improving financial reporting reliability.