Prof. Joseph Gerakos

Professor

Joseph Gerakos is Bakala Professor of Business Administration and Senior Associate Dean for Innovation and Growth at the Tuck School of Business, Dartmouth College. He earned his PhD in Accounting and MBA in Finance and Accounting from the Wharton School, University of Pennsylvania, and his AB from Dartmouth College. Before joining Tuck, he served as Associate Professor of Accounting at the University of Chicago Booth School of Business.His research examines markets for financial services, with a particular focus on audit market competition, audit production efficiency, and the performance of the asset management industry. He has published in leading journals such as Journal of Accounting Research, Journal of Accounting and Economics, Review of Accounting Studies, and Journal of Financial Economics. His work addresses policy-relevant issues including auditor market concentration, mandatory audit firm rotation, and the economic implications of audit regulation. Recent projects explore how audit production interacts with client accounting systems and internal controls, as well as the informational efficiency of going-concern opinions.Joseph teaches Managerial Accounting and has served as an editor for The Accounting Review. He regularly contributes to policy discussions and academic conferences on audit quality and financial transparency. His research has been supported by grants from the Foundation for Auditing Research, the Hong Kong Research Grants Council, and the Fama-Miller Center, among others.

Audit Production
Production is the process by which inputs are transformed into outputs through factors of production. In the case of an audit, audit effort (labor and time) is expended to produce assurance over client financial statements. As is typical for services, labor is the most important factor in the production of audits. Although audit production is crucial to understanding the economics of auditing, the literature on audit production is sparse due to the difficulty of observing and measuring the factors of production. Specifically, the lack of access to internal audit firm information makes it difficult for researchers to observe and measure production inputs. Moreover, the credence good nature of an audit makes it difficult to observe audit output (i.e., the level of assurance).
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Audit Production
Production is the process by which inputs are transformed into outputs through factors of production. In the case of an audit, audit effort (labor and time) is expended to produce assurance over client financial statements (O’Keefe, Simunic, and Stein 1994). As is typical for services, labor is the most important factor in the production of audits. Although audit production is crucial to understanding the economics of auditing, the literature on audit production is sparse due to the difficulty of observing and measuring the factors of production. Specifically, the lack of access to internal audit firm information makes it difficult for researchers to observe and measure production inputs. Moreover, the credence good nature of an audit makes it difficult to observe audit output (i.e., the level of assurance).  
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3rd FAR International Conference Proceedings

KEY TAKE-AWAYS

Audit firm culture is viewed by regulators and inspectors as the means to enhance audit quality. This study uses the Competing Values Framework (CVF) to explore the culture of
large audit firms, and their attempts to change their cultures. We find that these firms predominantly emphasize a culture characterized by collaboration and control, which is consistent with an inward focus. We also find that audit firms struggle to implement a consistent understanding of culture across their offices and function levels, and there is a gap in how partners perceive culture compared to that of non-partner staff. This “culture gap” has negative consequences on auditors, as larger culture gaps are associated with lower psychological safety and poorer person organization fit. Embedding mechanisms can lower the culture gap, but having adequate resources is far more important of an embedding mechanism than “tone at the top.” The findings underscore the importance of actively communicating and reinforcing stated cultural values, and provide audit firms with a practical tool to diagnose problems in achieving culture change.

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