Where does the time go? Auditors commercial effort, professional effort, and audit quality

This study tests the taken-for-granted assumption that auditors’ commercial motivation threatens audit quality using internal time reporting data from two Big Four firms in the Netherlands. The research team examined whether auditors’ commercial effort is associated with their compensation, total effort on their audit engagements, and audit engagement quality.

The researchers find some evidence of a positive relation between commercial effort and compensation.

They find no evidence that auditors’ commercial effort is associated with total audit effort in their portfolio and, most importantly, they find no evidence of a negative relation between auditors’ commercial effort and audit quality. This challenges widely held beliefs that commercial effort is necessarily problematic for auditing.

Further, the researchers find that auditors’ commercial effort is positively related to their reliance on quality control—proxied as technical consultations—and that there is a positive indirect effect of commercial effort on audit quality via consultations. That is, they identify conditions in which auditors’ commercial effort increases audit quality, suggesting that further restrictions on commercial effort are likely unnecessary.