Do Audit Partners’ Directorships in Non-Client Companies Affect Their Audit Quality?

In this study, we examine changes in audit quality when audit partners serve as directors in companies other than their client companies. On the one hand, through knowledge transfer, directorial experience may help audit partners better understand the correspondence between business operations and accounting numbers, leading to enhanced audit quality. On the other hand, the busyness theory suggests that audit partners with concurrent directorships may be too busy to maintain high audit quality. Based on 2002–2015 Taiwanese data, the results show that the financial statements audited by partners during the periods in which they provide director services to non-client boards are likelier to be restated due to misstatements than in the periods in which they do not provide such services. This suggests that concurrent directorships decrease audit quality. Moreover, the decrease in audit quality is mainly associated with audit partners serving as committee members, independent directors, or directors in industries different from those of their audit clients. Overall, the results indicate that audit partners’ concurrent directorships reduce audit quality, supporting the auditor busyness theory.