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Auditor's financial stress: An inconspicuous determinant of audit outcomes

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  • Felix, Robert
  • Wilford, Amanda L.

Abstract

The relation between personnel-related factors and office-level audit quality has not received much attention in the audit literature. To examine this further, we investigate the relationship between an auditor's financial stress and audit quality. We proxy financial stress with negative equity, when a home's market value is less than its mortgage, which is gathered from the real estate website Zillow from 2011 through 2017. More specifically, we aggregate the average values of negative equity for homes in the same city as our sample's audit offices. The results indicate that firms with auditor offices in areas with higher levels of negative equity experience higher levels of audit failure. Our results are robust when we control for median accountant salary and foreclosure rates in areas surrounding the home audit office. Overall, our findings provide important initial evidence on a potential relation between auditor-level financial stress and audit quality.

Suggested Citation

  • Felix, Robert & Wilford, Amanda L., 2024. "Auditor's financial stress: An inconspicuous determinant of audit outcomes," Advances in accounting, Elsevier, vol. 67(C).
    • Handle: RePEc:eee:advacc:v:67:y:2024:i:c:s0882611023000603
    DOI: 10.1016/j.adiac.2023.100701
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Audit personnel stress; Audit personnel competencies; Audit quality; Determinants of audit quality;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing
    • M50 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Personnel Economics - - - General

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