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2016B02 – Why some auditors thrive while others struggle – The effects of multiple team membership on audit quality
Project Number – 2016B02
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2016B02 – Why some auditors thrive while others struggle – The effects of multiple team membership on audit quality

What?

What?

Identify the conditions where under audit firms can most effectively leverage on Multiple Team Memberships (specific to the firms’ business model) and team members to most effectively cope with the demands of fluid team membership in securing both high quality audits, a motivated workforce, and appropriate team culture. I.e., increasing the benefits of working with fluid teams, while mitigating the negative effects of MTM to employees.

Why?

To learn why in the given business model (i.e., fluid audit teams, MTM) one employee strives, while another suffers. I.e., identifty previously unconsidered factors for firms to learn how to better capitalize on HC within the audit team and firm context (create appropriate organizational conditions). Furthermore, for audit staff to learn how to deal with the potential adverse effect and make use of the potential benefit (e.g., training on the job).

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Does auditor resilience mitigate the effects of multiple team memberships on quality threatening behaviors?
KEY TAKE-AWAYS Audit firms rely on audit teams where memberships are frequently shared, shifted and dissolved. In practice, this means that many auditors are part of multiple engagement teams for a given period of time. This paper examines why and when such multiple team memberships (MTMs) may lead auditors to engage in audit quality-threatening behaviors. We analyze data from a survey of 202 auditors—ranging from assistants to partners—working at Dutch audit firms. Our findings demonstrate that serving on MTMs can undermine auditor learning, and in so doing leads auditors to engage in audit quality threatening behaviors. Analyses show that less resilient auditors—those who are less able to bounce back from experienced difficulties—appear most susceptible to these deleterious effects. In addition, exploratory analyses suggest that the negative effect of serving on many MTMs appears to be more pronounced for field-level auditors than for management-level auditors.  
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Network Structure and Auditor Compensation: Evidence from a Bipartite Network
This paper examines the relationship between the extent of knowledge flow during audit practice (measured by the local network clustering coefficient) and auditor compensation. We exploit a unique bipartite (i.e. two-mode) network composed of individual auditors assigned to different audit engagements from an audit firm for one full year to determine our local network clustering coefficient and auditor compensation data from this audit firm’s personnel records. Informed by social networks theory and determinants of wage in labor economics, we find a positive association between local network clustering and auditor compensation, which is both statistically and economically significant. Our results are robust to alternative measures of local network clustering coefficient, alternative explanations of structural holes and centrality, alternative linear specification and endogeneity concern. Furthermore, we find that this positive association may be primarily driven by seniors working on audit engagements. Overall, our results suggest that embeddedness within knowledge networks plays an important role for auditor compensation.  
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FAR Masterclass Report: Masterclass on Multiple Team Membership
Working in multiple teams: (how) does that work? According to estimates, between 65 and 90 percent of the professionals work in multiple teams simultaneously. This, for example, holds for professionals in health care, in research teams at universities and for knowledge workers in general. This way of working is also common practice within audit firms. But how does simultaneously working in several audit teams affect audit quality? And what factors increase or reduce audit quality?
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Project info

Project Lead

Reggy Hooghiemstra

Research team

James Zhang
Floor Rink
Reggy Hooghiemstra
Dennis Veltrop

Involved University

Primary university
Project Number – 2016B02

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