Audit Completion Variance, Audit Quality and Audit Fees

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Abstract

We investigate the audit outcome implications of audit completion variance (ACV), defined as year-to-year changes in the sequence and length of individual offices’ audit completion dates. We identify a host of possible determinants of ACV and present evidence that ACV is most likely driven by audit planning scheduling inefficiencies. We then show that ACV is negatively associated with common proxies for audit quality, and higher audit fees. In additional tests, we document an incrementally stronger effect for complex engagements, but find no difference for first-year clients. We conclude that ACV, at least partially, stems from office-level scheduling inefficiencies, which lead to lower audit quality, and/or are passed on to clients through higher audit fees.

Authors

• Michael J Imhof, Wichita State University

• Jamie Hoelscher, Southern Illinois University - Edwardsville

• Scott E Seavey, Florida Atlantic University