Health Risk, Anxiety and Audit Quality: Evidence From Engagement Audit Partners

ABSTRACT Health concerns among employees can cause stress and anxiety, which can result in a shift in their priorities. We investigate how factors such as ethnicity‐related immunity, gender, and older age can impact audit quality due to perceived health‐related risks, anxiety, and fear among engagement audit partners. Our research shows that client firms with female and older engagement audit partners tend to have lower quality audits because the perceived health‐related risks and fears lead them to prioritize their family and personal well‐being over work. Our study provides evidence of the negative impact of health‐related risks and fears on engagement audit firms' ability to conduct effective and efficient audits, leading to more discretionary accruals. Contrary to the belief that female and more experienced engagement audit partners are associated with higher quality audits, our findings suggest otherwise. This has implications for investors, regulators and auditors, as it highlights how health‐related issues can influence employee performance and calls for a more empathetic and considerate approach to addressing these issues.