AAA Spark Meeting of Regions

Consequences of Employee Turnover in Audit Firms

• In Event: Office and Employee Characteristics and Audit Quality

Abstract

This paper examines the consequences to audit quality of collective audit firm employee turnover. Audit regulators have noted that turnover may be a root cause of audit quality issues identified during their inspections. However, there is limited empirical research on the determinants and consequences of collective audit employee turnover. We model the determinants of collective employee turnover and examine the effect of expected and abnormal audit firm employee turnover, including dismissals versus voluntary turnover, on engagement audit quality for a large sample of Belgian private and public company audit engagements. We find robust evidence that abnormal, but not expected, employee turnover, driven by voluntary turnover, is associated with lower audit quality. Interestingly, we also find evidence that dismissals are associated with higher audit quality. Our contribution is initial empirical archival evidence of the effect of different types of audit employee turnover on engagement audit quality.

Authors

• Aleksandra B Zimmerman, Florida State University

• Christophe Van Linden, Illinois State University

• Marie-Laure Vandenhaute, Vrije Universiteit Brussel