The facade of accountability: symbolic assurance and earnings management

This study examines the facade of accountability created by mandatory Engagement Partner Signatures (EPS) and their role in enabling symbolic assurance while perpetuating earnings management among UK firms. Using a difference-in-differences approach, we compare UK firms with counterparts in four European markets that adopted EPS earlier. Our findings reveal a notable increase in both real earnings management and discretionary accruals following EPS implementation in the UK. This suggests that firms leverage EPS as a symbolic gesture of compliance, signaling enhanced audit accountability while continuing earnings manipulation through various methods. Despite the intended purpose of reinforcing audit rigor, EPS primarily serves as a ceremonial mechanism, especially in low-litigation-risk sectors where engagement partners face pressures such as client retention and fee dependency.