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Audit Firms’ Response To Audit Failures: Evidence From Partner Resource Reallocation, Elizabeth Cowle
Audit Firms’ Response To Audit Failures: Evidence From Partner Resource Reallocation, Elizabeth Cowle
Graduate Theses and Dissertations
I investigate whether audit firms reallocate partner resources following restatement announcements and, consequently, whether a supply-side response is beneficial in mitigating the previously documented implications of realized audit failures. I find a positive association between prior period restatement announcements and the year-over-year percentage change in the number of engagement partners allocated to a local audit office. Further analysis suggests that a supply-side response is beneficial in mitigating the persistence of low-quality audits and lost market share. However, I also find some evidence suggesting that the reallocation of partner resources can be detrimental to audit quality at offices from which partners …