The effect of auditors’ workload pressure and compression on audit quality

Abstract

This study aims to examine the effect of workload compression and workload pressure on overall audit quality. It is motivated by the little available evidence concerning this potential effect as well as author’s experiences in audit profession. Workload pressure and workload compression are surrogated by busy season (i.e fiscal year end date in December), audit workload (i.e pressure degree of audit company on clients’ portfolio at certain point of time), audit concentration (i.e concentration of audit company on one client at certain point of time). Abnormal accrual is the proxy of audit quality. The main purpose of the study is to strengthen the results of prior research by López & Peters (2012), then requires management team of audit firms draw more attentions on preparing resources to ensure audit quality for all ongoing engagements. In other words, it requires audit partners become more prudent before accepting new clients, moreover, new regulations about the resource preparation should be issued to ensure the audit quality. Our study used a sample of 6,500 observations between 2010 and 2013 from Compustat and Audit Analytics.

The results show that busy season companies have higher abnormal accruals, in other words, workload compression and workload pressure negatively affect audit quality, which is consistent with prior researches. Moreover, our study found the company size and number of business segments, geographical segments and operating segments also affect audit quality. This result is an open topic for further researches in the future because of its inconsistency with previous study.