Do Client Knowledge and Audit Team Composition Mitigate Partner Workload?

• In Event: Continental Breakfast & Research and Education Forum
  In Paper Session: Table 8: Audit Quality

Abstract

A heavy workload for engagement partners leads to less effective audits. The Center for Audit Quality and the Public Company Accounting Oversight Board cautioned on this negative impact from partner busyness; several studies show that audit partner heavy workloads indeed damage audit quality (e.g., Sundgren and Svanström, 2014). However, how the burden of heavy workloads can be mitigated has not been thoroughly investigated, despite its important implications. Our results using Japanese public firms, for which partner-level engagement team member names are available, show that audit quality declines as the number of clients assigned to an engagement partner increases. However, we find that client-specific knowledge accumulated by partners and the availability of higher-ranked personnel in an audit team are mitigating factors for the partners’ heavy workload to maintain audit quality. These results remain constant when using abnormal accruals and restatements as audit quality measures.

Authors

• Katsushi Suzuki, Hitotsubashi University

• Tomomi Takada, Kobe University