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Is Audit Behavior Contagious? Teamwork Experience and Audit Quality by Individual Auditors

  • PCAOB (US Public Company Accounting Oversight Board) (dark gray) Image

Nov 30, 2016

In November 2016, the Public Company Accounting Oversight Board (PCAOB) released the paper "Is Audit Behavior Contagious? Teamwork Experience and Audit Quality by Individual Auditors." The paper was presented at the PCOAB’s 2016 Conference on Auditing and Capital Markets on October 20-21, 2016.

In this paper, the authors demonstrate that bad audit behavior is transmitted through the teamwork experience of individual auditors. They found that auditors who have previously worked in a team (team auditors) with those who are sanctioned by the regulators for audit failure (contagious auditors) are more likely to issue lenient audit opinions, and their audited accounting numbers are more likely to be downward restated in the future, compared to those who have no overlap with contagious auditors in their teamwork experience. This contagion effect is, however, absent among auditors who previously worked in the same audit firm but not in the same team (colleague auditors) as contagious auditors. Their findings highlight the importance of analyzing social learning via teamwork experience in understanding how audit quality at the individual level is shaped.

Review the study on the PCAOB's website.

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