ESSAYS ON LABOR IN AUDIT FIRMS: EVIDENCE FROM COMPREHENSIVE EMPLOYER-EMPLOYEE MATCHED DATASET

Abstract

The dissertation consists of two essays on the talents in audit firms. The first essay develops and tests hypotheses about compensation policy and auditor retention inside accounting firms. Our analyses use de-identified employment and compensation data to investigate the entire pay distribution within accounting firms. Overall, our results suggest that compensation policies in professional accounting firms affect auditor behavior. Continuing from the first essay, we find that “move down” is more common than “move up” in the auditing profession. However, auditors who move up to Big 4 firms are not necessarily the top performers. The result of these limited auditor movements from the Big 4 accounting firms to the non-Big 4 accounting firms is an accounting profession with distinct differences in auditor quality.