FAR Practice Note: Workload allocation process within audit firms
Context: Audit firms rely heavily on their intellectually skilled auditors, who manage and lead the engagement team (so-called ‘lead auditors’ in this project). To deliver high-quality audit services to their clients and to offer opportunity for auditors to learn, audit firms should try to achieve proper matching between their clients and the auditors based on compatibility between them. Appropriate matching can constitute a difficult exercise as both the lead auditors and clients may have an important stake that encourages them to intervene in the allocation process. Such interventions may affect the level of audit quality that the audit firm is able to deliver when clients and auditors are not appropriately matched.
Objective and method: The objective of this research is to understand how audit firms determine the lead auditor-client pair in terms of appropriate matching. Given that such allocations take place in a work environment where lead auditors and clients have their own demands and as such can intervene in this process, this research further aims to identify the lead auditors’ motivations for intervening in this process. We will conduct semi-structured interviews with lead auditors and planning department staff of audit firms to address our research questions.
Authors
Eddy Cardinaels (1975) is full Professor of accounting at Tilburg University and part-time professor at KU Leuven. His work combines new insights from psychology and behavioral economics to study how different information presentation (ABC, BSC, summaries of earnings releases) can affect decision making of managers within companies. Other experimental work focuses on drivers of honest reporting and social motives in inter-firm negotiations. He also conducts archival work on corporate governance examining how social connections between board members affect financial reporting, how companies use their networks to engage in tax avoidance and factors that drive (excess) compensation.
