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August 16, 2019

The impact of audit salaries on audit oucomes

In a paper entitled Salary Perception and Career Prospects in Audit Firms, academics from California’s John Molson School of Business at Concordia University review the role that auditor’s salary perception has on audit quality and delay.

The researchers, Ahmed Hammami, Ruesdandra Moldovan and Elisabeth Peltier, found there is discrepancy between pay perception and reality. The discrepancy is explained, though not completely, by salary level, comparisons to peers and superiors, firm-wide attitudes, cost of living and human capital in the area, work-life balance, and perceived career prospects.

Surprisingly, pay dissatisfaction relates positively with audit quality (small profits and going concern opinions) and audit efficiency (audit report lag), after controlling for salary level. Salary perception appears to be more important for auditor’s job performance than salary level, but this relation is moderated by perceptions of career prospects – lower level auditors feel that they are paid low salaries but accept it for the benefits and deferred compensation they expect from experience. The researchers conclude that dissatisfaction with current income level is not necessarily a problem for audit quality when auditors expect to remain in the profession, climb up the ranks, and earn higher compensation in the process.

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