Does Audit Partner Workload Compression Affect Audit Quality?

Forthcoming, European Accounting Review

58 Pages Posted: 3 Feb 2020 Last revised: 4 Feb 2020

See all articles by Jun Chen

Jun Chen

Zhejiang University

Wang Dong

Zhejiang University - School of Management

Hongling Han

Zhejiang University - School of Management

Nan Zhou

University of Cincinnati - Lindner College of Business

Date Written: January 10, 2020

Abstract

The effect of workload compression on the behavior of individual auditors has received extensive attention from regulators and scholars. We study this effect by utilizing two unique institutional features of the Chinese capital market: (1) the auditor signature requirement that reveals audit partner identities and (2) the uniform December 31 fiscal year-end that intensifies workload compression for audit partners. Calculated based on audit fees, our new measure of audit partner workload compression (APWC) is negatively related to accruals quality and the probability of modified audit opinions, while positively associated with the propensity to report small profits and the prospect of audit report delays. Nevertheless, accounting firms and client firms with audit partners facing workload compression are not more likely to receive government sanctions. These findings imply that APWC impairs audit quality but not to the extent that it would lead to egregious outcomes. Our evidence supports the PCAOB call to monitor workloads for individual auditors.

Keywords: Audit partner workload; Audit quality; Audit Opinion; Audit report delay

JEL Classification: M42

Suggested Citation

Chen, Jun and Dong, Wang and Han, Hongling and Zhou, Nan, Does Audit Partner Workload Compression Affect Audit Quality? (January 10, 2020). Forthcoming, European Accounting Review, Available at SSRN: https://ssrn.com/abstract=3517667

Jun Chen

Zhejiang University ( email )

School of Management
Zijingang Campus
Hangzhou, Zhejiang 310058
China

HOME PAGE: http://person.zju.edu.cn/junchen

Wang Dong (Contact Author)

Zhejiang University - School of Management ( email )

Hangzhou, Zhejiang Province 310058
China

Hongling Han

Zhejiang University - School of Management ( email )

Room701-07, School of Management,
Zhejiang University
Hangzhou, Zhejiang Province 310058
China
+86-571-88206830 (Phone)
+86-571-88206867 (Fax)

Nan Zhou

University of Cincinnati - Lindner College of Business ( email )

P.O. Box 210211
Cincinnati, OH 45221-0211
United States

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