Going big, going small, strategies for researching audit quality

My Inaugural Lecture at Maastricht University updates how archival audit research has evolved since the summary in Francis (1994) of what we then knew from archival research, and describes my own journey from “going big” and asking basic questions about the audit market and audit quality, to “going small” with a focus on smaller units of analysis (offices, partners, and engagement teams) as the key to understanding audit quality. I used to believe that audit firm differences, and differences across offices within firms, were the most important audit-related sources of variation in quality, and that differences in people and audit teams were relatively unimportant. The evidence in Cameran, Campa and Francis (2022) convinced me otherwise, and I now believe that understanding partner-led engagement teams is more important than the combined effects of audit firms and offices in studying audit quality. Audit firms are still something of a black box, and our knowledge to date has been limited to what we can publicly observe about their organizational structures. However, we cannot observe people and engagement teams beyond the identity of the engagement partner, at least not with publicly available data. To learn more means going inside the black box of audit firms, and that means getting the assistance of audit firms to help with such research. I started my career as an applied economist using publicly available data to ask basic questions about the audit market and the demand for and supply of quality-differentiated audits. As I get closer to the end of my career, I now see myself as more of a management scientist, moving inside the organization to understand the consequences for audit quality arising from the internal culture of an audit firm, the personal characteristics of the people who work in audit firms, and the behaviors within the partner-led engagement teams that result in high-quality audit outcomes. To do this research requires proprietary data from audit firms, and interaction with the professionals who work in these firms. I thank the Foundation for Auditing Research in the Netherlands for facilitating my access to audit firms and their staff, and for the assistance of these firms in helping me to research the organizational drivers of high-quality audits.