Research Symposium

BIO

John is a second-year honors student from Stratham, New Hampshire, pursuing a major in Management Information Systems and Astrophysics. He is interested in research within the fields of business and astrophysics, with special emphasis on the subjects of information systems, finance, accounting, and astrophysics. With future aspirations to attend a Ph.D. program in astrophysics or to enter the field of quantitative business after graduation, he is very interested in continuing future research. John’s academic interests aligned perfectly with his work in this research project, leveraging skills in data analysis and collection to investigate trends in the accounting industry. This research experience has given him in-depth knowledge regarding how partners interact with their clientele and the biases that drive their work. Outside of the classroom, John is fascinated with sports and the corresponding analytics that direct decisions in the industry. He is excited to pursue further research opportunities as he continues his academic career.

Hometown Bias in Auditing

Abstract

This study investigates whether audit partners exhibit hometown bias, which may affect audit quality and financial reporting integrity. Understanding this bias is important for consistent, objective auditing and broader accounting practices. Data were collected on audit partners across the U.S., including Big 4 and Non-Big 4 firms, spanning all 50 states. Information from public people-finder sources was compiled into spreadsheets capturing demographics, education, and professional affiliations. Analyses examined the relationship between auditors’ hometowns and client outcomes: earnings management, restatements, going concern opinions, and internal control weaknesses. Firms audited by hometown partners are more likely to just meet or slightly beat earnings forecasts, with positive coefficients of 0.295–0.383, suggesting leniency. Negative coefficients for restatements indicate these firms are less likely to later correct financial statements. Going concern opinions show minimal effect, likely due to high oversight. Internal control weakness results are mixed, stronger in Non-Big 4 firms, highlighting the influence of oversight. Geographically, California (148) and New York (119) account for ~23% of the 1,160-firm sample, suggesting hometown effects are concentrated in major financial hubs. The findings demonstrate that hometown bias exists among audit partners, influencing earnings judgments and restatement likelihood, while high-oversight judgments remain largely unaffected. This bias underscores the need for careful audit partner assignments and continued research into mechanisms to maintain objectivity, particularly in concentrated regions.

Keywords: Accounting, Hometown, Bias, Data, Partner