Do Satisfied Auditors Perform Better? Investigating the Association between Audit Firm Employee Job Satisfaction and Audit Quality

A.H. Gold, Yu Flora Kuang, Gladys Lee, Bo Qin

Research output: Contribution to ConferenceAbstractAcademic

Abstract

We examine the association between employee job satisfaction in audit firms and audit quality. Using a US-based dataset of auditor self-assessments on their job satisfaction between 2008 and 2017, we find that auditor job satisfaction is positively associated with audit quality measured at both an audit-firm level and a client level. At the audit firm-level, we show that audit firms with higher employee satisfaction have a lower tendency to be involved in a SEC or PCAOB enforcement action. At the client-firm level, audit firms with higher employee satisfaction perform higher quality audits, in that their clients report lower discretionary accruals, experience a lower propensity of financial restatement, and a lower likelihood of misstatement. Further, we find that the positive effects of audit firm employee job satisfaction on audit quality are mainly applicable to non-Big 4 audit firms (vis-à-vis Big 4 firms), and staff-level auditors (vis-à-vis managers, partners and directors).
LanguageEnglish
DOIs
Publication statusPublished - 12 Jan 2018

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Audit quality
Job satisfaction
Auditors
Audit firms
Employees
Employee satisfaction
Propensity
Enforcement
Discretionary accruals
Self-assessment
Financial restatements
PCAOB
Big 4
Staff
Managers
Quality audit

Keywords

  • Job Satisfaction, Audit Quality, SEC Regulation

Cite this

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abstract = "We examine the association between employee job satisfaction in audit firms and audit quality. Using a US-based dataset of auditor self-assessments on their job satisfaction between 2008 and 2017, we find that auditor job satisfaction is positively associated with audit quality measured at both an audit-firm level and a client level. At the audit firm-level, we show that audit firms with higher employee satisfaction have a lower tendency to be involved in a SEC or PCAOB enforcement action. At the client-firm level, audit firms with higher employee satisfaction perform higher quality audits, in that their clients report lower discretionary accruals, experience a lower propensity of financial restatement, and a lower likelihood of misstatement. Further, we find that the positive effects of audit firm employee job satisfaction on audit quality are mainly applicable to non-Big 4 audit firms (vis-{\`a}-vis Big 4 firms), and staff-level auditors (vis-{\`a}-vis managers, partners and directors).",
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Do Satisfied Auditors Perform Better? Investigating the Association between Audit Firm Employee Job Satisfaction and Audit Quality. / Gold, A.H.; Kuang, Yu Flora; Lee, Gladys; Qin, Bo.

2018.

Research output: Contribution to ConferenceAbstractAcademic

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T1 - Do Satisfied Auditors Perform Better? Investigating the Association between Audit Firm Employee Job Satisfaction and Audit Quality

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AU - Kuang, Yu Flora

AU - Lee, Gladys

AU - Qin, Bo

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N2 - We examine the association between employee job satisfaction in audit firms and audit quality. Using a US-based dataset of auditor self-assessments on their job satisfaction between 2008 and 2017, we find that auditor job satisfaction is positively associated with audit quality measured at both an audit-firm level and a client level. At the audit firm-level, we show that audit firms with higher employee satisfaction have a lower tendency to be involved in a SEC or PCAOB enforcement action. At the client-firm level, audit firms with higher employee satisfaction perform higher quality audits, in that their clients report lower discretionary accruals, experience a lower propensity of financial restatement, and a lower likelihood of misstatement. Further, we find that the positive effects of audit firm employee job satisfaction on audit quality are mainly applicable to non-Big 4 audit firms (vis-à-vis Big 4 firms), and staff-level auditors (vis-à-vis managers, partners and directors).

AB - We examine the association between employee job satisfaction in audit firms and audit quality. Using a US-based dataset of auditor self-assessments on their job satisfaction between 2008 and 2017, we find that auditor job satisfaction is positively associated with audit quality measured at both an audit-firm level and a client level. At the audit firm-level, we show that audit firms with higher employee satisfaction have a lower tendency to be involved in a SEC or PCAOB enforcement action. At the client-firm level, audit firms with higher employee satisfaction perform higher quality audits, in that their clients report lower discretionary accruals, experience a lower propensity of financial restatement, and a lower likelihood of misstatement. Further, we find that the positive effects of audit firm employee job satisfaction on audit quality are mainly applicable to non-Big 4 audit firms (vis-à-vis Big 4 firms), and staff-level auditors (vis-à-vis managers, partners and directors).

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