This study examines the audit pricing effects when auditors specialize in industries conducive to transferable audit processes. Our results indicate that industry specialists charge incrementally lower fees in industries with homogenous operations, and particularly in industries with both homogenous operations and complex accounting practices. Moreover, we discover that audit quality is no lower for clients audited by these specialists offering fee discounts, consistent with a conclusion that the reduction in fees indicates cost efficiencies rather than lower-quality audits. Further analysis indicates that the shared economies of scale only occur in a subsample of client firms with relatively high bargaining power. When considered in conjunction with prior research using a survivorship approach, our study provides evidence that certain industries lend themselves to specialization because auditors generate cost-based competitive advantages without compromising service quality. Data Availability: Data are publicly available from the sources identified in the paper.

Recruiting talent is a major issue for the accounting profession and is especially salient for small firms with limited resources and brand recognition. In this study, we examine the challenges small accounting firms face when recruiting from universities and the strategies they use to overcome them. Drawing on interviews with 34 stakeholders (primarily recruiting specialists and human resource managers), we develop a process model of small-firm recruiting and present evidence related to each phase: (1) targeting certain universities and students, (2) engaging in university recruiting activities, (3) extending offers, and (4) aiming to evaluate recruiting outcomes. Guided by theory, our findings reveal that small accounting firms develop organizational familiarity and image with students while navigating fatalism and balancing imitation and differentiation in their recruiting strategies. We conclude with a call to reconsider the “biggest is best” assumptions that dominate mainstream accounting research and provide suggestions for future research. Data Availability: Data were obtained from interviews.

Small accounting firms represent important participants in the audit market, yet details of how they operate and develop competencies remain unexplored. Small firms often join forces through accounting associations and networks (AANs), which may help them overcome significant challenges commonly faced by smaller firms. We interview 37 partners from 18 firms representing nine AANs to examine how small firms leverage their AAN membership and to understand the related implications for audit quality. Our findings indicate that small firms acquire needed resources and enhance their market legitimacy through AAN membership; however, the nature and extent to which they do so varies by AAN type. Importantly, we also find that the majority of respondents perceive AAN resources, especially access to expertise, as critical to their firms' audit quality. Our research, informed by a theoretical lens based on resource dependence and legitimacy, enriches existing auditing literature, provides a new perspective for member firms and regulators, and responds to recent calls to understand factors affecting accounting firms' competencies.

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.