The Effect of Workload Compression on Audit Quality
Posted: 27 Jan 2017
Date Written: Novemeber 2012
This study investigates whether workload pressures, as proxied by the audit busy season (i.e., December fiscal year-end date) and auditor workload compression (i.e., relative concentration of companies with the same fiscal year-end date in an auditor's client portfolio), affect audit quality. Using a sample of 8,384 firm-year observations during the period 2006–2009, we find that busy season companies exhibit greater magnitudes of abnormal accruals and are more likely to meet or beat certain earnings benchmarks. Additional tests show that these associations are enhanced by the degree of auditor workload compression. Prior experimental and survey research indicates that workload pressures lead to dysfunctional behaviors and lower audit quality among individual auditors. Our archival findings suggest that these pressures can transcend the quality control mechanisms of a firm, affecting quality at the audit engagement level.
Keywords: Audit Quality, Workload Compression, Busy Season, Abnormal Accruals, Earnings Benchmarks
JEL Classification: M40, M42, M42, M49
Suggested Citation: Suggested Citation