The Impact of Audit Employee Job Satisfaction on Audit Quality

54 Pages Posted: 19 Oct 2018

See all articles by Phong Truong

Phong Truong

Pennsylvania State University

Date Written: September 21, 2018


I exploit a novel office-level dataset on employee job satisfaction from and a natural experiment based on local precipitation during the auditing time period to examine the effect of audit employee job satisfaction on audit quality. I find that a unit increase in job satisfaction (on a scale from 1 to 5) decreases absolute abnormal accruals by 0.7 standard deviations. Using AAERs, “Big R” and “Little r” restatements, I find that more satisfied audit employees are more likely to detect significant accounting irregularities, but not minor accounting errors. Among job satisfaction indicators, these effects are driven by management quality and career opportunities. Overall, this evidence demonstrates the importance of individual audit employees to the audit process and has practical implications for audit firms’ treatment of employees and audited firms’ information environment.

Keywords: Audit Quality, Job Satisfaction, Audit Employees, Financial Misconduct

JEL Classification: M42, M41

Suggested Citation

Truong, Phong, The Impact of Audit Employee Job Satisfaction on Audit Quality (September 21, 2018). Available at SSRN: or

Phong Truong (Contact Author)

Pennsylvania State University ( email )

University Park
State College, PA 16802
United States
16802 (Fax)

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