Virginia Tech
"Do as I Say, Not as I Do": Audit Firm Leadership and Engagement-Level Risk
Abstract
dc:description.abstractThis study examines the "off-the-job" behavior of individuals in office-level leadership positions across the Big 4 audit firms in the U.S. In their leadership role, the managing partner is responsible for setting the tone at the top of an office through formal communication of firm-wide policies and an informal example through their behavior and preferences. Given this role, I predict that engagements conducted within offices led by individuals who are willing to break the rules will exhibit characteristics synonymous with increased audit risks. Relying on their history of legal infractions to identify rule-breaking behavior, I find managing partners with prior infractions are associated with engagements that reflect increased misstatement risk and detection risk (i.e., lower auditor effort). Additional tests reveal that the results are concentrated in offices that are located further away from alternative governance mechanisms within the same audit firm. Importantly, after controlling for the risk of misstatement, I find the pricing of misstatement risk declines significantly on engagements in offices with infraction managing partners. The results are robust to alternative measures of managing partners' prior infractions and the use of entropy balancing techniques, along with several other robustness tests. Collectively, my study contributes to our limited knowledge of the quality control structures in place at large audit firms and provides a potential mechanism for tone at the Big 4 audit firms to vary across offices.
Degree
thesis:*- Name thesis:degree_name
- Doctor of Philosophy
- Level thesis:degree_level
- doctoral
- Discipline thesis:degree_discipline
- Accounting and Information Systems
- Department dc:contributor.department
- Accounting and Information Systems
- Grantor dc:publisher
- Virginia Tech
- Year dc:date.issued
- 2022
Author and committee
dc:creator, dc:contributor.*- Author dc:creator
-
- Valentine, Delia Fidelas
- Chair dc:contributor.committeechair
-
- Stein, Sarah E.
- Committee members dc:contributor.committeemember
-
- Davidson, Robert H.
- Acito, Andrew A.
- Erickson, Matthew James
Subjects
dc:subject × 4Rights
dc:rights- Statement dc:rights
-
- In Copyright
- Licence dc:rights.uri
- Language dc:language.iso
- en
Identifiers
dc:identifier.*- Dc Identifier Other
- vt_gsexam:34303
- OAI identifier oai:identifier
- oai:vtechworks.lib.vt.edu:10919/109652