Office level contagion: impact of a non-timely filing by a major busy season client

Purpose: This study aims to investigate the busy season contagion effects on other clients of the Big 4 auditor’s local office associated with the non-timely (NT) filing(s) by large accelerated filer (LAF) client(s) of the office. Specifically, the authors examine the influence such events have on the audit quality and timeliness of other clients of that office. Design/methodology/approach: Using panel data of annual NT filings of LAF clients between 2006 and 2019, the authors apply the ordinary least squares regression technique to model audit reporting lag (ARL) and the logistic regression technique to model the probability of restatements. Findings: Controlling for audit firm, industry and year-fixed effects, the authors find that a LAF NT filing reduces audit quality and audit timeliness of other clients of the office, as measured by restatement risk and ARL. The impact on ARL is most pronounced on the medium and small clients within the office. The deteriorated audit quality is observed for medium clients. Research limitations/implications: The results of this study have practical implications for auditors and regulators. They reveal the contagion effect in the auditor’s local office with the NT LAF client. The main limitation of the study is the lack of staffing utilization data to allow for drawing conclusions on causality. Originality/value: To the best of the authors’ knowledge, this is the first study to document the contagion effect of NT filings of LAF clients conducted at the auditor’s local office level.

Files

Metadata

Work Title Office level contagion: impact of a non-timely filing by a major busy season client
Access
Open Access
Creators
  1. Justyna Skomra
  2. R. Drew Sellers
  3. Piotr Antoni Skomra
Keyword
  1. Audit busy season schedule
  2. Audit quality
  3. Audit reporting lag
  4. Contagion effect
  5. Restatements
License In Copyright (Rights Reserved)
Work Type Article
Publisher
  1. Managerial Auditing Journal
Publication Date April 27, 2023
Publisher Identifier (DOI)
  1. https://doi.org/10.1108/MAJ-03-2022-3471
Deposited July 23, 2024

Versions

Analytics

Collections

This resource is currently not in any collection.

Work History

Version 1
published

  • Created
  • Added Skomra_Sellers_Skomra_2023.pdf
  • Added Creator Justyna Skomra
  • Added Creator R. Drew Sellers
  • Added Creator Piotr Antoni Skomra
  • Published
  • Updated
  • Updated Keyword Show Changes
    Keyword
    • Audit busy season schedule, Audit quality, Audit reporting lag, Contagion effect, Restatements