How should auditors organize their employee structure? - Employee structure of accounting firms and audit quality

Abstract

This study analyzes the effect of audit firm employee structure on audit quality. The study utilizes the disclosure of accounting firm data in Korea mandatory since 2003. Measuring audit quality by performance-adjusted discretionary accruals, this study shows that staffing leverage, experience, and workload per partner are positively related to audit quality, with some indication of a non-linear relationship. The effects are different for Big 4 and non-Big 4 firms, in that the effect of staffing leverage is smaller for the Big 4 firms. This study provides practical guidance on audit quality control for accounting firms, companies, and regulators.