Audit personnel salaries and audit quality

Hoopes, Jeffrey L.; Merkley, Kenneth J.; Pacelli, Joseph; Schroeder, Joseph H.

doi:10.1007/s11142-018-9458-y

Cited by 83 publications

(41 citation statements)

References 59 publications

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“…The salary paid to auditorsa main extrinsic incentive for employeeshas important potential implications for audit quality. In line with this expectation, Hoopes et al (2018) show a negative relation between auditor's pay and client misstatements.…”

Section: Introductionsupporting

confidence: 68%

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Salary perception and career prospects in audit firms

Hammami

Moldovan

Peltier

2020

MAJ

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Purpose This paper aims to examine the role that auditor’s salary perception has on audit quality and delay. The findings contribute to a greater understanding of the audit employee-level factors that influence audit work outcomes. Design/methodology/approach The authors use Big 6 employee reviews, salary data and audit and financial data from 2007 to 2017 to measure how to audit employees’ pay satisfaction affects audit quality (small profits and going concern opinions) and audit delay. The authors use a regression approach to analyze this relationship. In subsequent tests, the authors split the sample on high career opportunities to investigate how this moderates the relationship between salary perception and audit quality. Findings The authors document a discrepancy between pay perception and reality. It is explained, though not completely, by salary level, comparisons to peers and superiors, firm-wide attitudes, cost of living and human capital in the area, work–life balance and perceived career prospects. Surprisingly, the unexplained pay dissatisfaction relates positively to audit quality and audit efficiency (audit delay), after controlling for salary level. Further tests show that an audit employee’s expectation of career opportunities moderates this result. Originality/value This is the first paper that empirically tests the relationship between pay satisfaction and job performance in the context of audit employees in public accounting. The authors contribute to an emerging literature that investigates audit employee-level characteristics and attitudes in relation to audit quality.

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Section: Introductionsupporting

confidence: 68%

“…Drawing on MAJ 35,6 applied psychology literature, we propose a model of pay perception determinants in the context of audit employees. We complement the recent literature that examines the role of auditor salaries (Hoopes et al, 2018;Lee et al, 2019) by showing that pay perceptions matter incrementally for audit quality and efficiency.…”

Section: Introductionmentioning

confidence: 60%

Salary perception and career prospects in audit firms

Hammami

Moldovan

Peltier

2020

MAJ

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“…Examples of characteristics corresponding to improved quality include auditor size (DeAngelo ), office size (Francis et al ; Francis and Yu ), or industry expertise (Balsam et al ; Krishnan ; Reichelt and Wang ). More recently, Beck et al () documented a positive association between audit quality and the average education level in the MSA of the engagement office, and Hoopes et al () linked auditor salaries to audit quality.…”

Section: Prior Literature and Motivationmentioning

confidence: 99%

“…Consistent with these arguments, Hoopes et al () find evidence that audit firms pass higher costs associated with auditor salaries to clients.…”

mentioning

confidence: 90%

Do Clients Get What They Pay For? Evidence from Auditor and Engagement Fee Premiums

Moon

Shipman

Swanquist

et al. 2019

Contemporary Accting Res

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Despite the intuitive appeal, prior research finds mixed evidence on whether higher audit fees translate to superior audit quality. Under the assumption that product differentiation between auditors is based, in large part, on the level of financial statement assurance, we propose more refined measures of excess audit fees that separate auditor premiums from other fee premiums. Consistent with our conjecture, we identify significant variation in audit pricing across auditors (i.e., auditor premiums) that relates positively to audit quality. Conversely, we find no evidence that higher engagement‐specific fee premiums (i.e., fee model residuals) are positively related to proxies for audit quality. Additional tests indicate that our results do not simply reflect premiums attributable to auditor characteristics evaluated in prior research (e.g., Big 4 membership, office size, and industry expertise). In fact, our findings suggest that the positive association between auditor premiums and audit quality is better captured at the auditor level than it is at the auditor “tier,” office, auditor‐industry, or engagement levels. In sum, our results suggest that auditors charging higher fees, on average, deliver superior levels of financial statement assurance, but engagement‐specific fee premiums do not reflect quality‐enhancing audit effort. These contrasting results provide a possible explanation for the mixed findings in prior research.

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“…[2015], Dechow, Lawrence, and Ryans [2015], Hoopes et al. [2017]). We measure comment letters using the Audit Analytics comment letters database.…”

Section: Is Significant Nondisclosure Indicative Of Other Corporate Bmentioning

confidence: 99%

Strategic Subsidiary Disclosure

Dyreng

Hoopes

Langetieg

et al. 2020

J of Accounting Research

Self Cite

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Although subsidiary disclosures in firms' filings with the Securities and Exchanges Commission (SEC; Exhibit 21) represent the most granular required public disclosure of a firm's geographic footprint, little is understood about the quality of the disclosure, and anecdotal evidence suggests firms may not fully comply with the disclosure requirements. We use data provided by multinational firms to the Internal Revenue Service regarding their foreign subsidiary locations to explore the accuracy of public subsidiary disclosures on

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Audit personnel salaries and audit quality

Cited by 83 publications

References 59 publications

Salary perception and career prospects in audit firms

Salary perception and career prospects in audit firms

Do Clients Get What They Pay For? Evidence from Auditor and Engagement Fee Premiums

Strategic Subsidiary Disclosure

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