Abstract
We exploit non-accounting related class action suits against audit client-firms as an exogenous shock that shifts auditors’ attention towards the sued client, to test how auditors allocate resources and time and its subsequent effect on audit quality. Adopting this identification strategy, we show that client firms whose offices are situated in a different city as compared to the auditor’s office, experience more restatements in the years of the distraction as compared to
client firms that have their offices in the same city as the auditor’s offices. Results show that only firms situated in a different city experience a decline in their audit quality. Moreover, distracted audit offices are less likely to gain a new client. Results hold after a series of robustness checks.
client firms that have their offices in the same city as the auditor’s offices. Results show that only firms situated in a different city experience a decline in their audit quality. Moreover, distracted audit offices are less likely to gain a new client. Results hold after a series of robustness checks.
| Original language | English |
|---|---|
| Title of host publication | Proceedings of the EAA Annual Congress 2022 |
| Publication date | 2022 |
| Publication status | Published - 2022 |
| MoE publication type | A4 Article in conference proceedings |
Areas of Strength and Areas of High Potential (AoS and AoHP)
- AoS: Financial management, accounting, and governance