When Individual Auditors Move with Clients: Implications for Audit Quality

Abstract

We examine whether audit firm changes involving joint individual auditor–client moves are associated with higher audit quality than audit firm changes without such joint moves. We identify joint moves by tracing individual auditors who transition from the predecessor to the successor audit office around the timing of the client’s auditor change. Using a difference-in-differences design for audit firm changes between 2010 and 2022, we find that joint moves are associated with a lower likelihood of subsequent financial misstatements following the audit firm change. The effect is stronger when joint moves involve more senior auditors, when predecessor auditor tenure is longer, and when engagements are more complex, consistent with joint moves preserving client-specific knowledge. We also find evidence that junior auditors contribute to these effects when their tenure at the predecessor firm provides greater potential exposure to the client. Finally, the effect is concentrated in successor offices with comparable or stronger city-level industry expertise and in labor markets with a greater supply of accountants, consistent with a greater capacity to absorb transferred client-specific knowledge.