Does the signature of the audit manager on the audit report matter?: evidence from China

This study examines whether having an audit manager sign an audit report improves audit quality, using unique data from China, where an audit report can be signed by an audit manager with a CPA licence. We argue that, unlike an audit partner's signature that aims to improve audit quality through outcome accountability, the audit manager's signature could enhance audit quality through increased accountability in the audit process (process accountability). Consistent with this proposition, this study finds that the client firms with audit managers signing the audit report have higher audit quality (proxied by discretionary accruals and the propensity to issue modified audit opinions) and lower audit fees, compared to client firms without audit managers' signatures. Furthermore, this study examines if a client firm’s auditor-pair choice affects audit quality. Our findings suggest that client firms audited by a manager partner pair have higher audit quality and lower audit fees compared to client firms that use other auditor pairs, indicating that the increase in both process accountability and outcome accountability could be a better way to improve audit quality.