The Impacts of Audit Office Relocation

• In Event: Break with Research and Education Poster Forum

Abstract

This study investigates the economic impacts and consequences of audit office relocation within the same geographical area. Specifically, we examine how relocating an audit office affects an audit office’s ability to attract clients, audit fees, and audit quality. We document that relocated offices generate increased revenue through an increase in clients and higher audit fees in the following year compared to non-relocated offices. These results suggest that audit firms likely move their office to gain more clients, and they are able to pass their increased costs associated with relocating to their clients through increased audit fees. However, we also find that relocating offices provide lower audit quality—perhaps due to the increased disruption or stress caused by the move. As a result, auditors should be aware of a possible decline in audit quality after an office relocation so they can adapt their audit procedures or allocation of internal resources to limit this negative impact. To our knowledge, this is the first paper to examine the effects of relocating audit offices, which is a fairly common occurrence. The findings in this paper should be useful for auditors to make decisions regarding the possible relocation of an audit office, or the resource allocation afterward. Also, these findings should be helpful to regulators in promoting audit quality with their monitoring functions.

Authors

• Jared A Eutsler, University of North Texas

• Tram Ngoc Nguyen, University of North Texas