In this study, we examine the benefits of membership in an accounting firm association, network, or alliance (collectively referred to as “an association”). Associations provide member accounting firms with numerous benefits, including access to the expertise of professionals from other independent member firms, joint conferences and technical trainings, assistance in dealing with staffing and geographic limitations, and the ability to use the association name in marketing materials. We expect these benefits to result in higher-quality audits and higher audit fees (or audit fee premiums). Using hand-collected data on association membership, we find that association member firms conduct higher-quality audits than nonmember firms, where audit quality is proxied for by fewer Public Company Accounting Oversight Board (PCAOB) inspection deficiencies and fewer financial statement misstatements, as well as less extreme absolute discretionary accruals and lower positive discretionary accruals. We also find that audit fees are higher for clients of member firms than for clients of nonmember firms, suggesting that clients are willing to pay an audit fee premium to engage association member audit firms. Finally, we find that member firm audits are of similar quality to a size-matched sample of Big 4 audits, but member firm clients pay lower fee premiums than do Big 4 clients. Our inferences are robust to the use of company size-matched control samples, audit firm size-matched control samples, propensity score matching, two-stage least squares regression, and to analyses that consider changes in association membership. Our findings should be of interest to regulators because they suggest that association membership assists small audit firms in overcoming barriers to auditing larger audit clients. In addition, our findings should be informative to audit committees when making auditor selection decisions, and to investors and accounting researchers interested in the relation between audit firm type and audit quality.

Oversight responsibilities for many audit committees (ACs) are evolving to include some of the hottest topics in the boardroom: enterprise risk management, cybersecurity, and environmental, social, and governance reporting. However, certain ACs avoid overseeing these evolving areas, creating significant variation across boards in the assignment of responsibilities. In this study, we seek to understand how ACs respond when environmental changes create new evolving risks that may extend the boundary of their traditional domain. To do so, we interview a diverse set of 29 AC members from U.S. publicly traded companies. We analyze our data through the theoretical lens of collaborative boundary work to identify how ACs respond by extending, blurring, or maintaining their perceived oversight boundaries, the related implications of these decisions, and their key tactics employed to manage AC workload. Our findings should be of interest to boards, investors, and regulators tasked with monitoring AC effectiveness.

We investigate changes in the quality and cost of audit services surrounding PCAOB Rule 3211, which requires disclosure of audit partner names in Form AP. To isolate changes due to Rule 3211 from other confounding factors, we use difference-in-differences analyses with separate control groups, including a group of companies that disclosed partner identities prior to Rule 3211. Our study also incorporates several measures from prior literature to proxy for various dimensions of audit quality. Evidence from the difference-in-differences analyses reveals that any immediate impact of Rule 3211 on audit quality or fees is limited to specific dimensions of audit quality, specific control groups, and/or specific company characteristics. We reach this conclusion after considering alternative research designs and evaluating confidence intervals for statistically insignificant coefficients. We caution that our findings only provide initial evidence and further research is necessary to evaluate other potential impacts of Rule 3211.