臺大管理論叢 NTU Management Review VOL.30 NO.2

The Effect of the Dual-Signature Requirement on Audit Quality 26 The Effect of the Dual-Signature Requirement on Audit Quality 1. Purpose and Objective Prior literature indicates that the personal characteristics of auditors affect audit quality (Gul, Wu, and Yang, 2013; Aobdia, Lin, and Petacchi, 2015). In recent years, many countries have required auditors to sign their names on audit reports to enhance their accountability, but most of them are silent about the number of partners signing the reports. Auditing standards and regulations in Taiwan require audit partners to sign their names on the audit reports. Additionally, since 1983, the authority in Taiwan requires two auditing partners to sign the client’s audit report together (Dual-signature hereafter) instead of having one audit partner sign the audit report (Single-signature hereafter). This study examines whether audit quality is higher under the dual-signature requirement than under the single-signature requirement. 2. Literature and Hypothesis DeAngelo (1981) indicates that auditors with a greater number of clients have more to lose when failing to report a misstatement in a particular client’s financial statements. Therefore, large audit firms provide higher audit quality. Under the dual-signature requirement, the loss of two auditors may be larger than the loss of one auditor. Therefore, the audit quality may be higher under the dual-signature system as opposed to the single- signature system. In addition, two auditors may attend to different information in the auditing process, which can increase audit quality (Libby and Trotman, 1993). Lennox and Wu (2018) also indicate that audits which use multiple engagement partners may have the following advantages. First, multiple engagement partners have more knowledge, experience, and expertise. Second, multiple engagement partners have greater opportunities for communication and consultations with one another. Third, multiple engagement partners bring a lower risk of collusion between partners and client management. Following prior studies (Craswell, Stokes, and Laughton, 2002; Lennox, 2005; Chen, Sun, and Wu, 2010; Chi and Chin, 2011; Chi, Douthett Jr., and Lisic, 2012), this study uses the higher probability of issuing a modified audit opinion as the indicator of higher audit quality. In summary, based on the preceding literature, the first hypothesis is as follows: Hsiao-Lun Lin , Department of Accountancy, National Taipei University Rong-Ruey Duh , Department of Accounting, National Taiwan University