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Dissertation
The effects of client operational shocks on audit office outcomes
Doctor of Philosophy (Ph.D.), Drexel University
Dec 2024
DOI:
https://doi.org/10.17918/00010900
Abstract
This study examines how significant operational shocks to client-firms affect audit office portfolio outcomes. I investigate changes in portfolio risk, auditor-client alignment, and audit quality when offices have a client with a significant operational shock. Specifically, I examine significant mergers and acquisitions (M&A) of client-firms. I examine how retaining the M&A client (creating capacity constraints) or losing the M&A client (creating capacity surplus) impacts audit portfolio outcomes across Big 4 and non-Big 4 offices. Using a staggered difference-in-differences design, I capture immediate portfolio responses and subsequent effects up to four years post-M&A, providing insight into the timing and persistence of these effects. Findings suggest that when Big 4 offices retain M&A clients, overall portfolio risk does not significantly change. In contrast, when Big 4 offices lose M&A clients, audit risk decreases, and client alignment improves. When non-Big 4 offices retain significant M&A clients, findings suggest decreased client alignment and lower audit quality. However, when non-Big 4 offices experience M&A client departures, these offices accept higher-risk clients but show immediate improvements in audit quality. This study contributes to the literature by examining how routine but significant operational changes to clients create lasting impacts on office-level portfolio management. The findings reveal that operational shocks to individual clients affect the office portfolio, affecting audit quality for other clients. These findings help explain why audit quality may vary systematically across offices, even when controlling for client characteristics.
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Details
- Title
- The effects of client operational shocks on audit office outcomes
- Creators
- Amanda Louisa Acevedo
- Contributors
- Barbara M. Grein (Advisor)
- Awarding Institution
- Drexel University
- Degree Awarded
- Doctor of Philosophy (Ph.D.)
- Publisher
- Drexel University; Philadelphia, Pennsylvania
- Number of pages
- vii, 107 pages
- Resource Type
- Dissertation
- Language
- English
- Academic Unit
- Accounting; Bennett S. LeBow College of Business; Drexel University
- Other Identifier
- 991022043393904721