Opening the black box of human resource allocations in audit firms: The assignment of audit partners to audit engagements

Bin Wu, Yaqian Wu, Min Zhang and Jiyuan Li

The British Accounting Review, 2024, vol. 56, issue 2

Abstract: Using unique and detailed data on audit partners, this study examines how audit firms make human resource allocation decisions. The empirical results show that clients with higher risks (i.e. tax, legal, and asset valuation risks) are more likely to be audited by partners with corresponding domain-specific expertise, and these partner–client matches are more likely to happen when audit firms have strong incentives to reduce engagement risks or have a favourable information environment to gain client-specific knowledge. The results are robust to different model specifications and alternative measures. We also list several reasons to support that the ‘client preference effect’ is less likely to be an alternative explanation. Finally, we find that audit firms' partner–client matches help reduce engagement risks and improve audit quality. This paper sheds light on audit firms' human resource allocation decisions and extends the literature on auditor expertise by investigating audit experts on tax, legal issues, and asset valuation that differ from the industry experts predominantly examined in the prior literature.

Keywords: Audit expert; Human resource allocation decision; Partner–client match; Engagement risk; Client-specific knowledge (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:bracre:v:56:y:2024:i:2:s089083892300077x

DOI: 10.1016/j.bar.2023.101231

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