Allies in The Break Room: The Effect of Accounting Alumni on Auditor Choice and the Hiring Agenda

• In Event: Auditor Employment

Abstract

This paper investigates the effect of accounting alumni on auditor choice and firm hiring practices. Using biographical data on accounting employees working at S&P 1500 firms, we study whether firms display a preference for auditors from whom they have more alumni as well as if auditor selection affects a firm’s subsequent hiring agenda. We find that a one standard deviation increase in an auditor’s alumni rate within a firm will on average increase the likelihood of that auditor being chosen by 5.1%. We also find that firms alter their hiring agenda in favor of the incoming auditor after a switch, especially if there is at least one member of upper management with an affiliation to the new auditor. Additionally, we find evidence that when firms switch auditors they choose a new auditor for which they can hire alumni from quickly.

Authors

• Nam Ho, Carnegie Mellon University

• Andrew Bird, Carnegie Mellon University

• Thomas Ruchti, Carnegie Mellon University