Auditor Distraction: The Case of Outside Job Opportunities for External Auditors and Audit Quality

63 Pages Posted: 7 Jul 2022 Last revised: 19 Dec 2023

See all articles by Matthew Ege

Matthew Ege

Texas A&M University - Department of Accounting

Young Hoon Kim

George Mason University - Department of Accounting

Dechun Wang

Texas A&M University

Date Written: December 2, 2023

Abstract

Public accountants are in high demand by non-accounting firms. While this demand attracts high-quality accountants to public accounting, it can negatively impact audit quality by distracting auditors. We find that the number of and increase in MSA-level busy season job postings for public accountants by non-accounting firms are positively associated with misstatements. Results are most pronounced (1) when job postings are for high-rank positions, (2) for accounting firms with high PCAOB deficiency rates, and (3) for accounting firm offices with auditor shortages. Results also suggest that accounting firms can mitigate the negative audit-quality effects of busy season job postings for public accountants by increasing auditor pay and improving auditor work-life balance. These results suggest that accounting firms are not immune to negative effects of auditor distraction from outside job opportunities despite accounting firms knowing that their auditors are highly sought after by non-accounting firms.

Keywords: labor market competition, auditors, employment opportunities, audit quality

JEL Classification: J23, J31, J40, M41, M49

Suggested Citation

Ege, Matthew and Kim, Young Hoon and Wang, Dechun, Auditor Distraction: The Case of Outside Job Opportunities for External Auditors and Audit Quality (December 2, 2023). Available at SSRN: https://ssrn.com/abstract=4148794 or http://dx.doi.org/10.2139/ssrn.4148794

Matthew Ege (Contact Author)

Texas A&M University - Department of Accounting ( email )

430 Wehner
College Station, TX 77843-4353
United States

Young Hoon Kim

George Mason University - Department of Accounting ( email )

Fairfax, VA
United States

Dechun Wang

Texas A&M University ( email )

430 Wehner
College Station, TX 77843-4353
United States

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