Is There a Brain Drain in Auditing? The Determinants and Consequences of Auditors' Leaving Public Accounting

This study investigates why auditors leave public accounting and the consequences of auditor departures. We find that audit competency is negatively associated with a departure decision. Specifically, audit partners and managers, as well as auditors generating more audit revenues and providing higher quality audits, have a lower likelihood of departure. However, female, young, non-Big 4 auditors, and those with better educational backgrounds have a higher likelihood of departing public accounting. In terms of consequences, we find that the audit firm is more likely to lose clients whose incumbent auditor departs. Clients that stay with the same firm, however, pay lower audit fees with no drop off of audit quality after their auditor's departure. In supplementary analyses, we also demonstrate that the determinants and consequences of auditor departures are different from those of auditor turnover. Specifically, while higher audit competency decreases the likelihood of auditor departures, it increases auditor turnover. Our study provides insights that should be of interest to the audit profession, audit firms, and regulators