Audit Disruption : The Case of Outside Job Opportunities for External Auditors and Audit Quality

Public accountants are in high demand by non-accounting firms. While this demand attracts high-quality accountants to public accounting, it can negatively impact audit quality via disrupting the audit (e.g., through distraction, reduced motivation to work hard, and human capital loss). We find that the number of and increase in MSA-level busy season job postings for public accountants by non-accounting firms are negatively associated with audit quality. Results are most pronounced for audit offices with recent audit failures and auditor shortages, consistent with auditor workload moderating the effect. Results also suggest that accounting firms can mitigate the negative audit quality effects of audit disruption from busy season job postings for public accountants by increasing auditor pay and using seconded staff from nearby large offices. These results suggest that accounting firms are not immune to negative effects of audit disruption from outside job opportunities for external auditors despite accounting firms knowing that their auditors are highly sought after by non-accounting firms