The Effect of Workload Compression on Audit Quality

Posted: 27 Jan 2017

See all articles by Dennis M. Lopez

Dennis M. Lopez

University of Texas at San Antonio

Gary F. Peters

University of Arkansas at Fayetteville

Date Written: Novemeber 2012

Abstract

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

Lopez, Dennis M. and Peters, Gary F., The Effect of Workload Compression on Audit Quality (Novemeber 2012). Auditing: A Journal of Practice & Theory, Vol. 31, No. 4, 2012. Available at SSRN: https://ssrn.com/abstract=2906513

Dennis M. Lopez (Contact Author)

University of Texas at San Antonio ( email )

One UTSA Circle
San Antonio, TX 78249
United States
210-458-4320 (Phone)
210-458-4322 (Fax)

HOME PAGE: http://business.utsa.edu/

Gary F. Peters

University of Arkansas at Fayetteville ( email )

Sam M. Walton College of Business
Department of Accounting
Fayetteville, AR 72701

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