Work

Consequences for Culpable Auditors

Year: 2025

Type: article

Abstract: ABSTRACT We present the first comprehensive descriptive evidence on the labor market and personal consequences for audit professionals in the United States who are named in SEC or PCAOB enforcement actions. Three key findings emerge. First, between 38% and 73% of culpable auditors depart from their firms within one year after the enforcement event. These departure rates are three to four times higher compared with a sample of non‐culpable auditors. Second, 83% of culpable auditors departing from Big 4 accounting firms exit the profession, compared with 58% of a departing non‐culpable comparison group. In contrast, about 77% of the culpable auditors leaving non–Big 4 accounting firms remain in public accounting, compared with 51% of a departing non‐culpable comparison group. Third, using novel data on personal real estate holdings, we find that culpable auditors do not appear to engage in markedly different transactions around enforcement compared with a comparison sample of non‐culpable individuals.

Source: Journal of Accounting Research

DOI: 10.1111/1475-679x.12608

Authors: Jagan Krishnan, Meng Li, Mihir N. Mehta, Hyun Jong Park

Institutions: Temple University, The University of Texas at Arlington, University of Michigan

Language: English

Topic: Auditing, Earnings Management, Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDGs: Peace, justice, and strong institutions, Decent work and economic growth

Open Access status: hybrid

Estimated APC paid: $4,420