Audit-Employee Turnover, Audit Delivery, and Auditor-Client Realignment
Khavis, Joshua A., Szerwo, Brandon
The Accounting Review · 2025 · Volume 100 · Issue 5
Abstract
Although the PCAOB and the Center for Audit Quality have raised concerns about the negative consequences of audit-employee turnover (PCAOB 2015,2024;CAQ 2019), these consequences remain largely undocumented due to data limitations. We use novel data to measure how audit-employee turnover within individual offices of accounting firms explains the auditor’s ability to deliver for their clients and shapes the auditor-client relationship. We document that audit-employee turnover hampers the auditor’s ability to deliver the audit and leads to auditor realignment. Specifically, audit-employee turnover is associated with costlier, less timely, and less thorough audits that are of lower quality, which damage auditor-client relationships and lead to greater auditor switching and clients selecting auditors with lower turnover. We find that the presence of other strains to the auditor-client relationship exacerbates turnover’s link with auditor realignment. We further find that the impact of turnover varies by employee rank and when turnover occurs. Data Availability:Data are available from sources identified in the text. JEL Classifications:G28; G38; J63; M12; M41; M49.
Keywords
audit-employee turnover, audit quality, auditor-client realignment, auditor switching, audit fees, auditor human capital
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