You Can’t Get There from Here: The Influence of an Audit Partner’s Prior Non-Public Accounting Experience on Audit Outcomes

We examine the importance of audit partners’ prior non-public accounting experience (hereafter, “industry experience”) to audit outcomes. We conducted 20 semi-structured interviews of audit partners with industry experience to explore their career path choices, their perceptions of the challenges and benefits stemming from this experience, and their perceptions of how this experience influences their current audit work. To provide a balanced perspective, we supplement these interviews with nine semi-structured interviews of audit partners who have spent their entire career in public accounting but have worked with or evaluated partners with industry experience. Grounded in theory and the results of these interviews, we empirically examine using a unique hand-collected dataset whether audit partners with industry experience conduct higher quality and more efficient audits. Our evidence implies that industry experience is associated with both higher audit quality and greater efficiency. In additional analyses, we examine the influence of potential mechanisms for these observed associations and find some evidence that the nature and timing of this experience matters. Specifically, actual first-hand experience in major oversight positions among boomerang auditors and a shorter amount of time spent outside public accounting play an integral role in the quality of the audits that these partners deliver, while experience in a major oversight position or specialized industry in which the partner audits translates into greater efficiencies.