Work

The Evolution of Performance Measurement, Career Development, and Compensation for Audit Partners in the Context of Public Scrutiny

Year: 2026

Type: article

Abstract: ABSTRACT We examine how audit firms changed their policies regarding audit partner performance measurement, career development, and compensation during a period of heightened public scrutiny of audit quality (2007 to 2017). We theorize how implementing policy changes requires a delicate transition in the organizational design and internal processes of the firms and may not effectively translate into their day-to-day practices. Our access to proprietary performance management policies and individual partner performance and compensation data from the eight largest Dutch audit firms allows us to gain an in-depth understanding of the evolution of performance management for audit partners. We find that most of the policy changes have real consequences. For example, audit quality becomes more consequential to career development, whereas profit sharing becomes better linked to quality and long-term performance. We conclude that audit firms appear effectively responsive to public scrutiny, increasingly aligning partner incentives with societal expectations of audit quality.

Source: The Accounting Review

DOI: 10.2308/tar-2021-0569

Authors: Olof Bik, Jan Bouwens, W. Robert Knechel, Yuxia Zou

Institutions: University of Groningen, University of Amsterdam, University of Auckland, University of Florida, Nanyang Technological University

Language: English

Topic: Auditing, Earnings Management, Governance

Subfield: Accounting

Field: Business, Management and Accounting

Domain: Social Sciences

SDG: Peace, justice, and strong institutions

Open Access status: bronze

OpenAlex ID: W7127700307