Does Gender Matter in Audit? Evidence on Earnings Management and Audit Delay from Croatia

Abstract

Background: There is an expanding body of research on the relationship between auditor gender and earnings management, based on the assumption that female auditors possess specific innate characteristics relevant to external audit quality. Objectives: To further existing knowledge, this study examines the moderating effect of audit delay and the difference between post-audit and pre-audit financial reporting quality as direct measures of audit quality and provides insight into opportunities for women in the Croatian audit market. Methods/Approach: This analysis used panel regression to estimate the research model and the modified Jones model as a measure of discretionary accruals. Results: In addition to highlighting Croatia as the country with the highest female audit partner participation in audit engagements, the analysis revealed that earnings management decreases following an audit conducted by male audit partners. The beneficial impact of female audit partners is documented after the moderating effect of audit delay is included, and during the first year of the COVID-19 pandemic. Conclusions: The findings suggest that female audit partners may utilise audit delay more effectively, enhancing oversight during periods of financial distress. At the same time, earnings management is generally reduced in audits conducted by male audit partners.