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    An empirical investigation of the impact of audit and...
    research summary posted July 20, 2015 by Jennifer M Mueller-Phillips, tagged 05.0 Audit Team Composition, 05.05 Diversity of Skill Sets e.g., Tenure and Experience 
    An empirical investigation of the impact of audit and auditor characteristics on auditor performance.
    Practical Implications:

    The study provides a real-life setting, offering external validation, allowing the authors to analyze the performance and the characteristics of an audit team, as opposed to an individual as it is done in most experimental studies. As they measure audit performance by the tax adjustment resulting from a tax audit, the study also contributes to the tax audit literature by further explaining the determinants of a corporate tax audit outcome. The authors provide additional insight on audit and audit team characteristics that are associated with tax adjustments.


    Alissa, W., Capkun, V., Jeanjean, T., & Suca, N. 2014. An empirical investigation of the impact of audit and auditor characteristics on auditor performance. Accounting, Organizations & Society 39 (7): 495-510.

    tax audits, audit performance, audit experience
    Purpose of the Study:

    Audit performance is determined not only by the inherent complexity of the firm or the business unit audited, but also by audit task and auditor characteristics. A large body of experimental and theoretical research in psychology and auditing shows that audit performance increases with effort , decreases in task complexity, and increases in auditor experience. In this paper, the authors offer external validation to these findings by providing supporting empirical archival evidence.

    Due to increasing regulation, the number and complexity of audit tasks is rising, requiring more effort and knowledge on the part of auditors in internal, financial, and tax audits alike. This, in turn, puts more pressure on internal audit departments, audit firms, and tax authorities to understand and manage the design of their audits and audit teams in order to maximize performance. Given that audit tasks vary in complexity, and, unavoidably, auditors vary in knowledge and ability, maximum performance will be achieved only if the combination of task complexity and audit team characteristics is such so as to allow for the highest output per unit of effort (dedicated capacity). Consequently, the optimal allocation of effort becomes one of the most important drivers of performance, especially in the environment where the capacity is constrained, such as internal audit departments, audit firms and tax authorities.

    Design/Method/ Approach:

    The authors use a unique and confidential database of 15,392 tax audits performed by the Croatian Tax Administration during the 20022006 period to examine the impact of task complexity, auditor experience, and auditor effort on audit performance. The authors also used annual corporate income tax filings and VAT filings.  


    The authors find that task complexity mitigates the positive relationship between auditor effort and audit performance, consistent with the psychology literature argument that more complex tasks require more cognitive effort and that there is a diminishing marginal impact of effort on performance. They also find that auditor experience enhances the impact of auditor effort on performance. This result is in line with the argument that effort has a positive impact on performance only if the individual has some experience with the task. The results indicate that more experience increases the impact of auditor effort on audit performance more when complexity is high. This suggests that assigning a highly experienced auditor to a more complex task has a bigger marginal impact on performance than assigning a highly experienced auditor to a low complexity task, and consequently maximizes total performance. In other words, the skills of highly experienced auditors are wasted on low complexity tasks.

    Audit Team Composition
    Diversity of Skill Sets (e.g. Tenure & Experience)