Flu Season, Human Capital Resources, and Audit Outcomes
Posted: 24 Aug 2018 Last revised: 3 Dec 2019
Date Written: January 1, 2019
This study examines whether influenza (flu), a previously unidentified threat to the conduct of public company audits, is associated with audit outcomes. Because the peak months of flu season overlap with audit busy season, audit offices most impacted by the flu may be adversely affected. Flu data collected from the Centers for Disease Control and Prevention (CDC) shows that the severity of the flu varies over time and across states, and thus, its impact is hard to predict. Our results show that the filing of audit reports is delayed, audit quality suffers, and audit production costs increase in audit offices most impacted by the flu. The demanding nature of audit busy season and the culture of audit firms may compel employees to go to work sick, a phenomenon known as presenteeism. When sick auditors go to work it is difficult to observe the influence of the flu on their performance, leading to adverse outcomes. This study informs regulators and practitioners with a vested interest in auditor judgment and audit quality and suggest that changes to audit firm culture may influence how auditors cope with the flu.
Keywords: audit report lag; non-timely filings; audit quality; discretionary accruals; material weaknesses; audit production costs; influenza
JEL Classification: I10, I12, E24, J24, M41, M42, M54
Suggested Citation: Suggested Citation