The geographic decentralization of audit firms and audit quality

Matthew J. Beck, Joshua L. Gunn and Nicholas Hallman

Journal of Accounting and Economics, 2019, vol. 68, issue 1

Abstract: Audit firms are organized as collections of geographically decentralized offices. Decentralization allows for increased proximity between offices and clients, improving the efficiency of auditors' interactions with client personnel. Yet decentralization also decreases the proximity between offices within each firm, potentially impeding auditors’ interactions with each other. We show that decreased proximity between offices reduces inter-office audit quality “spillovers” and that this effect is driven primarily by reduced monitoring and knowledge sharing. Our findings expand the “within office” view of audit production by demonstrating the importance of interactions between offices and the role of geographic proximity in facilitating them.

Keywords: Audit quality; Organizational structure; Geographic distance; Earnings quality; Audit office size (search for similar items in EconPapers)
JEL-codes: M41 M49 R30 (search for similar items in EconPapers)
Date: 2019
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (18)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jaecon:v:68:y:2019:i:1:s0165410119300278

DOI: 10.1016/j.jacceco.2019.101234

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