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  • Jennifer M Mueller-Phillips
    Education Requirements, Audit Fees, and Audit Quality
    research summary posted October 31, 2013 by Jennifer M Mueller-Phillips, tagged 05.0 Audit Team Composition, 05.07 Impact of 150-hour requirement, 11.0 Audit Quality and Quality Control 
    Education Requirements, Audit Fees, and Audit Quality
    Practical Implications:

    The empirical evidence in this paper is useful for state boards of accountancy that are considering adopting, revising, or rescinding the 150-hour requirements. The findings focus on a concrete economic implication, namely higher audit fees.

    For more information on this study, please contact Arthur Allen.


    Allen, Arthur, and Angela Woodland. 2010. Education Requirements, Audit Fees, and Audit Quality. Auditing: A Journal of Practice &Theory 29 (2): 1-25.

    audit fees; education; 150-hour requirement
    Purpose of the Study:

    Education requirements are a continuing topic of discussion and debate in the auditing profession. Proponents argue that higher requirements lead to more prepared professionals; opponents argue that the additional barrier to entry will decrease the supply of accountants, raise auditing costs, and possibly decrease audit quality.

    The purpose of this study is to examine whether stricter educational requirements lead to higher costs for audit clients.

    Design/Method/ Approach:
    • Authors test whether the adoption of the 150-hour requirement led to significantly higher audit fees.
    • Audit fee data is collected from 2000 – 2004.
    • Authors test whether corporations in 150-hour states have higher fees than those in other states.
    • Authors also test whether fees increase within states that adopt the 150-hour requirement, relative to levels prior to the requirement.

    Corporations in 150-hour states have fees that are on average 4.8 percent higher than corporations in non-150-hour states.
    For states that adopt the 150-hour requirement, audit fees continue to increase over time even after the adoption, consistent with the theory that a higher barrier to entry attracts fewer new accountants.
    Corporations headquartered in states with higher general wage levels pay higher audit fees.
    No association found between adoption of the 150-hour requirement and audit quality.

    Audit Quality & Quality Control, Audit Team Composition
    Impact of 150-hour requirement

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