Engagement Team Composition, Audit Production and Audit Quality

• In Event: Audit Quality

Abstract

This paper investigates the relation between engagement team composition – in terms of size, heterogeneity and familiarity – and engagement team performance. Engagement team performance is conceived as the quality rendered to the client’s financial statements and total effort to complete the engagement. Based on Steiner (1972), we posit that an inverted U shaped relation exists between team size and audit quality and that member familiarity is positively related with audit quality and negatively related with total effort. We also hypothesize that the involvement of non-audit specialists during the audit is positively associated with audit quality. The team composition measures in the paper relate to some of the recently proposed audit quality indicators by the PCAOB (2015) with respect to its audit quality framework. We find an inverted U shaped relation between team size and audit quality. The inclusion of non-audit specialists is associated with better accruals quality when the client also purchases non-audit services. Finally, we document that higher familiarity between the engagement partner and the engagement manager is associated with better accruals quality and lower total effort.

Authors

• Christophe Van Linden, Belmont University

• W Robert Knechel, University of Florida

• Marleen Willekens, KU Leuven