Workload Leverage and the Effect on Audit Quality

Abstract

Practitioners and regulators suggests audit quality is negatively associated with auditor workloads (PCAOB 2015). We examine the association between office-level workload leverage and an office’s audit quality from 2004-2015 for all accelerated filers. The increase in workloads during busy season can instigate cognitive fatigue (Cohen 1980) if not appropriately mitigated by adequately preparing audit professional’s expectations (Glass and Singer 1972). Our findings indicate that increased busy-season workloads are associated with lower audit quality for accelerated clients of Non-Big 4 audit firms, whereas Big 4 auditors with higher workload leverage provide lower audit quality for non-accelerated filers. These results provide support for cognitive fatigue for all audit firm sizes; however, different sized audit firms experience cognitive fatigue at different points during busy season. Our findings contribute to the literature examining workload leverage and auditor burnout by providing empirical evidence of office workload influencing the audit process differently for different office sizes