Is There a Brain Drain in Auditing? The Determinants and Consequences of Auditors' Leaving Public Accounting

59 Pages Posted: 19 Apr 2017 Last revised: 7 Jun 2019

See all articles by W. Robert Knechel

W. Robert Knechel

University of Florida - Fisher School of Accounting

Juan Mao

University of Texas at San Antonio - Department of Accounting

Baolei Qi

Xi'an Jiaotong University (XJTU) - School of Management

Zili Zhuang

The Chinese University of Hong Kong (CUHK) - Faculty of Business Administration

Date Written: May 15, 2019

Abstract

This study investigates why auditors leave public accounting and the consequences of auditor departures. We find that audit competency is negatively associated with a departure decision. Specifically, audit partners and managers, as well as auditors generating more audit revenues and providing higher quality audits, have a lower likelihood of departure. However, female, young, non-Big 4 auditors, and those with better educational backgrounds have a higher likelihood of departing public accounting. In terms of consequences, we find that the audit firm is more likely to lose clients whose incumbent auditor departs. Clients that stay with the same firm, however, pay lower audit fees with no drop off of audit quality after their auditor’s departure. In supplementary analyses, we also demonstrate that the determinants and consequences of auditor departures are different from those of auditor turnover. Specifically, while higher audit competency decreases the likelihood of auditor departures, it increases auditor turnover. Our study provides insights that should be of interest to the audit profession, audit firms, and regulators.

Keywords: audit partner; auditor departure; audit firm switch; audit fees; audit quality

Suggested Citation

Knechel, W. Robert and Mao, Juan and Qi, Baolei and Zhuang, Zili, Is There a Brain Drain in Auditing? The Determinants and Consequences of Auditors' Leaving Public Accounting (May 15, 2019). Available at SSRN: https://ssrn.com/abstract=2954582 or http://dx.doi.org/10.2139/ssrn.2954582

W. Robert Knechel (Contact Author)

University of Florida - Fisher School of Accounting ( email )

Warrington College of Business
PO Box 117166
Gainesville, FL 32611-7166
United States

Juan Mao

University of Texas at San Antonio - Department of Accounting ( email )

One UTSA Circle
San Antonio, TX 78249
United States
210-458-8305 (Phone)

Baolei Qi

Xi'an Jiaotong University (XJTU) - School of Management ( email )

28,Xianning West Road
Xi'an, Shaanxi 710049
China

Zili Zhuang

The Chinese University of Hong Kong (CUHK) - Faculty of Business Administration ( email )

Shatin N.T.
Hong Kong

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