• The Number of Female Audit Partners Is Terrible

    By | July 26, 2017

    A new study shows that women are drastically underrepresented as audit firm partners, averaging only around 16 percent for audit partners with U.S. audit clients. In some cities such as Washington, D.C. and San Jose, California, the percentage of female partners was around 10 percent. Yikes.

    The Big 4 firms performed a little better than their non-Big 4 counterparts, with the representation of women being 16.4 percent and 15.4 percent, respectively.

    The research of Professor Jenna Burke of the University of Colorado Denver, Rani Hoitash of Bentley University, and Professor Udi Hoitash of Northeastern University focuses on the recently released Rule 3211 from the PCAOB. As you probably know, the rule requires registered public accounting firms to disclose the name of the audit partner for every public company issuer. The study showed that the new disclosure requirements resulted in increased audit quality, increased audit fees, and a significant decrease in audit delays.

    It seems that the PCAOB’s argument was correct. Putting your name on your homework encourages you to turn it in on time and do a better job.

    What was especially interesting is that the researchers also studied the differences between having a male or female audit partner. Some of the major conclusions were:

    1. Audit quality increases for female partners due to a lower percentage of discretionary accruals.
    2. Clients with female partners pay 2.4% more in audit fees due to a risk premium increase or higher effort.
    3. Female partners at Big 4 firms did not have an increase in audit delays. Female partners at non-Big 4 firms had only a slight increase in delays.

    Okay, female audit partners have superior audit quality, charge more in audit fees, and at the Big 4 firms, have no increase in audit delay. Seems like the female audit partners are doing a damn fine job. So why is the auditing profession is still hanging out at 16%?

    Aside from the benefits above, women add a unique perspective to a client’s business or their CPA firm as a whole. According to the new study’s research, women provide the following unique benefits:

    • Women have better acquisition and debt issuance decisions as well as more conservative earnings management strategies.
    • Having more women in board-level positions results in better firm monitoring and performance.

    Plus, another study of over 21,000 global, publicly-traded companies found that having more women yields better financial performance. This study states that having at least 30% of women in leadership positions led to an increase in a company’s net profit margin of 6%.

    None of this is complicated. Sixteen percent of women at the audit partner level is not good enough. Guess we should work on that.

    [Audit Partner Identification: Early Evidence from U.S. Form AP Filings via AT]

    Image: iStock/Sudowoodo

    • AccrualWorld

      maybe its because the life of a partner is terrible? I know the money is good…but the rest of it seems to suck

    • Most if not all of the “differences” between male and female audit partners comes down to this: “Female audit partners lead a similar number of engagements, but in Big 4 firms these engagements are smaller in size.”

    • Big4Veteran

      I worked for many women during my time in public accounting, so I consider myself an expert on this subject. There are always exceptions, but in general, I found the women I worked for to be more Nazi-like in their approach to auditing, client relationships and managing staff. Maybe it’s because they felt like they needed to prove something, or because they knew they were at a disadvantage, but most women I worked with were giant hard-asses about everything. They had to constantly prove their toughness and their dominance over their subordinates. They had to be better and smarter than everyone else, maybe due to insecurity, or maybe due to their perceived place in the business world. It does not surprise me at all that women partners tend to have higher quality audits and charge more fees due to the assessed “risk profile” of their clients.

      One last point: Most of the male partners I worked for in public accounting sucked at their job as well. So this may have something to do with women being slightly better at grinding clients and staff.

      NOTE: One thing I noticed in this article is that it seems to suggest that the only criteria for whether an audit partner is “good” is the quality of their audits. But being a successful partner at a large accounting firm involves other skills too, like building and maintaining client relationships, bringing in new clients, managing engagement economics and developing staff. I wonder how women generally compare to men on these skills. In my experience, not great.

      • keepin_it_real

        I’ve worked for a lot of male audit partners and a few female ones in my time at big 4. My observations are slightly more positive than yours. I’ve been lucky enough to avoid the Nazi women partners.

        Males partners I worked with fall into 2 categories. Lazy fucks who didn’t do shit other then manage client relationships or indecisive dicks who couldn’t make a decision and were always 2nd guessing themselves. They’d make a final decision a week before filing date that was the opposite of what was decided made 5 months ago.

        The small number of women audit partners I worked with sucked at client relationships but were more hands on and helped a lot more. They still 2nd guessed themselves and couldn’t make a decision but they wouldn’t do it at the last minute.

      • Juan Deck

        This is spot on. The women I worked for always seemed to feel the need to one up everyone around them and shoot down any contributions others tried to make in fear of it affecting their own rating. This made a very uncomfortable work environment where others knowingly withheld information from their teammates, hurting the overall audit.
        That’s why I only work for dudes

    • Adam Hill

      Holy cow is this a selective article and maybe planted to drum up some readership? These researchers would be great audit staff, as they can pull whatever stats that support their objective.

      Wasn’t there some other article from this site in the past that went a little deeper than this Earth orbit? It charted the number of women and men at each level of the profession. That seemed to be at least a little more informative for the reader to make their own hypothesis.

      Or it could be that women are just plain smarter and get out of the shit storm sooner.

    • KM

      I was curious how audit quality was defined so I took a look at the study:

      “Audit Quality (Discretionary Accruals)
      The first set of dependent variables is comprised of discretionary accruals (DISC-ACC) and the change in discretionary accruals (∆DISC-ACC), which are used to proxy for audit quality. DISCACC is calculated using a variant of the modified Jones model (Dechow, Sloan, and Sweeney 1995) as introduced by Kothari, Leone, and Wasley (2005), which additionally controls for company performance by including lagged ROA in the computation model. As discretionary accruals decrease, audit quality increases.”

      According to studies on the relationship between audit quality and discretionary accruals is so-so at best.

    • Guest99

      Definitely an article with a big agenda and cherry picked points. But the facts are these. Of the women who are partners, the great majority seem to have the following traits:

      To be a partner requires a spouse that supports you at home, is flexible in his schedule, and is willing to take the back seat. CONSISTENTLY. Much harder to find in men.

      The focus for women shifts to children. Even for the ones who make partner, a lot cut back to flex schedules at some point to spend more time with children. Especially true for audit with the travel involved. Simply put, women don’t care as much as being a partner as their lives go on. The ones that do sacrifice time with their kids.

      Unfortunately, successful partners have to constantly assess their personnel situation. This usually results in a decisive decision to let some people go annually. I’ve noticed women put off this aspect of the job much more than men.

      Simply put:. Women don’t care as much about making partner as their lives go on. Not all, but most.

      There is no big conspiracy here.

    • Guest99

      Maybe the author can explain why she didn’t make partner. That part is strangely missing from the article.

    • McValue Meal Audit

      Wow, what a stupid article.

    • GuCCi-MaNe

      I’ve worked for a few female partners. They’re a tough crowd to please

    • mmmKool Ade

      “Sixteen percent of women at the audit partner level is not good enough. Guess we should work on that.”

      WE should NOT work on that. If women want to be partner, they can choose to be. There is no barrier preventing them from doing so, only life/work choices that put fewer women on the path to partner.

    • Biff Tannen

      I think women are slightly better at accounting overall then men.

    • sludgemonkey

      I have been under a few women partners and as a general rule it has been enjoyable.