Do Ethnic Minority Audit Partners Face Discrimination? Evidence From the Australian Audit Market

The professional literature has provided evidence of discrimination against ethnic minority\r\nprofessionals in a number of research contexts, including law, architecture, construction,\r\nand health care. However, research on ethnicity-based discrimination in the accounting profession\r\nhas been sparser and has generally relied on ethnic minorities’ perceptions of discrimination\r\nrather than actual discrimination. In this study, we complement and extend this\r\nresearch by investigating whether ethnic minority audit partners are associated with lower\r\naudit fees than nonethnic minority audit partners. We also consider whether the association\r\nbetween ethnicity and audit fees depends on the status of the audit firm in which audit\r\npartners work. We find that ethnic minority audit partners are associated with lower audit\r\nfees and that this holds true only when they work in lower-status audit firms.\r\nSupplementary analyses carried out on our data suggest that discrimination is more likely\r\nto be performed by audit clients than by audit firms as we do not find evidence that audit\r\nfirms systematically and selectively allocate ethnic minority audit partners to clients with\r\nspecific characteristics (e.g., potentially less lucrative clients). Our study contributes to the\r\nliterature on ethnicity-based discrimination in the accounting profession, to the literature\r\non professional stereotypes, and to the audit pricing literature.