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    A Theoretical Framework of the Relationship between Public...
    research summary posted May 9, 2012 by The Auditing Section, last edited May 25, 2012, tagged 05.0 Audit Team Composition, 05.04 Staff Hiring, Turnover and Morale 
    A Theoretical Framework of the Relationship between Public Accounting Firms and Their Auditors
    Practical Implications:

    The model developed by the authors provides a theoretical foundation for understanding and exploring issues related to CPA firm and auditor employee behavior in the public accounting environment. Most important, the framework identifies factors impacting both what firms should provide to their CPA employees and how the employees may value what is provided. For example, the compensation package received by employees should include not only salaries and benefits, but also the opportunities for future development, flexibility of work and personal satisfaction.


    Almer, E. D., J. L. Higgs, and K. L. Hooks. 2005.  A Theoretical Framework of the Relationship between Public Accounting Firms and Their Auditors. Behavioral Research in Accounting 17: 1-22.

    Purpose of the Study:

    The behavior of auditors employed by public accounting firms has drawn significant attention.  Prior accounting research explains and predicts auditor behavior in the work environment, such as socialization, turnover, expertise and audit quality reduction acts. However, none has developed an overall model of the auditor-public accounting firm employment relationship. The primary purpose of this study is to provide a model for the auditor-public accounting firm employment relationship, and to identify how auditing professionals contribute and what they receive as a result of their work efforts, as well as influences on those work efforts.

    Design/Method/ Approach:

    Not applicable, it is a theoretical paper.



    • An employment contract represents the relationship between a CPA firm employer and an employee. The value of the CPA-
      employee provided professional work received by the CPA firm should be equal to the compensation package received by the CPA employee.
    • Some factors can influence the value received by the CPA firms, such as the value of the CPA employees’ professional work, or some inefficiency due to temporary interruptions of work, and labor market forces. Also, the compensation package should include salary, benefits, development, flexibility, deferred compensation, and satisfaction of personal preferences.
    • The two parties of an employment contract may not well understand the nature of multidimensional job activities of an auditor, as well as how they are valued, communicated and measured.
    • It is unclear how CPA firms incorporate the temporary interruptions of work into the employment contracts and how interruptions may or may not benefit the firm and the auditors.
    • Salary and traditional benefits are not the only compensation received by auditors.
    • The value placed on professional development is unknown and influenced by various factors, and may differ between the auditor and the firm.
    • The value placed on flexibility is influenced by the personal needs of the auditor and confidence in the firm’s information system.
    • The value placed on deferred compensation is unknown and influenced by unspecified factors, and differs between the parties to the contract.
    • Satisfaction of personal preferences is necessary to the auditor, but the personal preferences are ill-defined and thus may not be properly valued or explicitly recognized in the employment contract.
    Audit Team Composition
    Staff Hiring - Turnover & Morale
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