Audit Firm Reputation and Status Incentives for Employee Benefit Plan Audit Quality

• In Event: Break and Research & Education Poster Forum

Abstract

There is a relatively large stream of empirical literature on the peer review process providing evidence that peer review deficiencies in the financial accounting context are associated with competition and experience incentives. Given that most of these analyses use public company peer review data which is no longer under peer review, this study attempts to address whether these findings are relevant in a subsector which retained peer review regulation: employee benefit plan audits. Building upon this stream of prior literature and using reputation theory and institutional theory, this study tests whether reputation and status of public accounting firms are associated with peer review deficiencies and auditor switches. Analyzing a sample of New York public accounting firms, this study provides evidence that both the reputation and the relative status of the peer reviewer is the most important determinant of peer review deficiencies. However, neither of these determinants is associated with changes in client mix. This study fills a call for additional research into the determinants of audit quality in the regulated employee benefit plan audit industry.

Author

• Matthew Reidenbach, Pace University