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Do Auditors Adjust Labor Allocation in Response to Client Media Coverage?

Tracks
Jade 2
Monday, July 1, 2024
5:30 PM - 5:45 PM

Presenter

Prof Ahrum Choi
Professor
Sungkyunkwan University

Do Auditors Adjust Labor Allocation in Response to Client Media Coverage?

Abstract

This study investigates how auditors adjust their labor allocations in response to client media coverage. Using detailed data on audit hours categorized by rank in Korea, we find that auditors increase audit hours in response to client media coverage by allocating more audit hours to more-experienced auditors (e.g., partners and senior staff). Further analyses indicate that quality reviewers and auditor-engaged specialists increase their efforts for clients with high media coverage, auditors' responses are stronger for Big 4 auditors and larger clients, and when the media content is negative. Our results are robust to alternative research designs that address endogeneity concerns. Overall, these findings suggest that auditors perceive client media coverage as an indicator of elevated audit risk based on their professional judgments and respond by increasing total audit hours and assigning more experienced members to the audit teams.

Biography

Professor Ahrum Choi received her Ph.D. in auditing from Seoul National University in Korea, worked at Hong Kong Baptist University from 2016 to 2022, and is currently at Sungkyunkwan University.

Chair

Eunice Khoo
Senior Lecturer
Australian National University

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