Salary Perception and Career Prospects in Audit Firms

Abstract

We examine the role that auditor’s salary perception has on audit quality and delay. Using Glassdoor ratings by U.S. Big 6 audit firm employees in audit and assurance, we first document that there is discrepancy between pay perception and reality. The discrepancy is explained, though not completely, by salary level, comparisons to peers and superiors, firm-wide attitudes, cost of living and human capital in the area, work-life balance, and perceived career prospects. Surprisingly, the unexplained pay dissatisfaction relates positively with audit quality (small profits and going concern opinions) and audit efficiency (audit report lag), after controlling for salary level. Further tests show that an audit employee’s expectation of career opportunities moderates this result. Our findings contribute to a greater understanding of the audit employee-level factors that influence audit work outcomes.