Primitive Audit Inputs and Audit Quality: An Empirical Analysis of PCAOB Partner and Staff Counts

• In Event: Continental Breakfast and Research & Education Forum
  In Roundtable Session: Table 10: Auditing and Financial Reporting Quality

Abstract

The U.S. Treasury Advisory Committee’s Report on the Audit Profession (2008) recommends developing key indicators of audit quality, requiring audit firms to publicly disclose these indicators. Using the raw partner and staff counts disclosed in Public Company Accounting Oversight Board (PCAOB) inspection reports, we estimate a workload to employee ratio for individual audit firms. We provide evidence that this simple audit input measure provides incremental explanatory value with respect to numerous audit quality measures. Consistent with prior behavioral and survey research, relatively high workload to employee ratios are associated with relatively low audit quality. Our results suggest that primitive audit input disclosures contain useful signals about audit quality.

Authors

• Steve Buchheit, Texas Tech University

• William L Buslepp, Texas Tech University