We examine whether audit partner individualism reduces earnings comparability in the United States. We argue that individualistic audit partners are more likely to deviate from internal working rules and allow clients more flexibility in making accounting choices, consequently decreasing their clients' earnings comparability. Using a novel partner‐level measure of individualism, we find that within individual Big 4 audit firms, earnings are less comparable between a company audited by an individualistic partner and a company audited by a non‐individualistic partner, relative to a pair of companies that are each audited by a non‐individualistic partner. Our inferences are robust to a changes analysis, a falsification test, and a propensity score matching procedure. We also find that the effect of partner individualism is less salient when the audit firm is under more stringent regulatory monitoring and when clients are more important, but more salient when individualistic partners are more confident about being different. Further analyses suggest that our main inferences are robust to controlling for differences in partners' cultural backgrounds and using client‐pairs audited by the same audit partner. Collectively, our study provides novel evidence on the role of auditor individualism in earnings comparability.

This study investigates whether PCAOB inspections of foreign auditors affect global financial reporting comparability. Foreign auditors may adjust audit methodologies to address PCAOB inspection findings, which could affect financial reporting of local clients. Exploiting both within‐ and cross‐country variation in PCAOB inspections, we predict and find that non‐US‐listed foreign companies' financial reporting becomes more comparable to their US and non‐US industry peers after their auditors undergo an initial inspection. However, there is a decrease in comparability compared to local peers whose auditors have not been inspected. Subsample tests suggest that the improvement in comparability is driven by (i) auditors that satisfactorily address deficiencies and (ii) auditors that do not publicly push back against deficiencies. The effects are dampened after local audit regulators begin inspection programs. Overall, our evidence suggests that the PCAOB international inspection program affects audit methodologies of inspected auditors in a consistent way, improving comparability across jurisdictions. The improved comparability implies that the PCAOB international inspection program may unintentionally help meet accounting regulators' goals of cross‐country financial reporting convergence, which potentially promotes efficient cross‐country capital allocation.