The Economics of Audit Production: What Matters for Audit Quality?

67 Pages Posted: 28 Dec 2018 Last revised: 28 Jul 2019

Date Written: July 24, 2019


Using proprietary data, we analyze how a variety of audit composition and team characteristics are associated with audit effectiveness and efficiency. We find that more time allocated prior to the final phase of the audit is associated with more effective audits. We also decompose the time allocation and experience characteristics of the core audit engagement team across the following roles: lead partner, engagement quality reviewer, and other experienced team members (comprised of other audit partners, directors, senior managers, and managers). While the lead partner time and experience are not associated with audit effectiveness, we find that more time spent and experience of other experienced team members are associated with more effective audits. Many of the characteristics that improve audit effectiveness do not improve efficiency, but rather are costly to the client, with one exception. Overall, our analysis highlights several cost-benefit tradeoffs to improving audit effectiveness.

Keywords: Audit Process, Audit Process Quality, Restatements, PCAOB

Suggested Citation

Aobdia, Daniel and Choudhary, Preeti and Newberger, Noah, The Economics of Audit Production: What Matters for Audit Quality? (July 24, 2019). Available at SSRN: or

Daniel Aobdia (Contact Author)

Northwestern University - Kellogg School of Management ( email )

2211 Campus Drive
Evanston, IL 60208
United States

Preeti Choudhary

University of Arizona, Eller College of Management ( email )

School of Accountancy
Tucson, AZ 85721
United States

Noah Newberger

Public Company Oversight Board ( email )

1666 Kase Street
Washington, DC 20006
United States

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