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

• In Event: Accounting Firm Policy an Audit Quality

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 during 2008 through 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 restatement, and a lower likelihood of fraudulent financial reporting. 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).

Authors

• Anna Gold, Vrije Universiteit Amsterdam

• Yu Flora Kuang, The University of Melbourne

• Gladys Lee, University of Melbourne

• Bo Qin, University of Melbourne