The importance of organizational culture in achieving audit quality : evidence from the adoption of equalized parental leave




Ballestero, Ryan Curt

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Large accounting firms invest considerable resources into employee talent, yet we know little about whether, and when, such efforts are effective. I investigate whether one specific initiative intended to promote a supportive culture, equalized parental leave, results in higher audit quality at three audit firms. I find that audit quality improves following the adoption of equalized parental leave. I also use a novel dataset of audit employee characteristics to examine how office-level demographics directly impact audit quality and moderate the effectiveness of equalized leave. I provide evidence that staff auditor qualification is positively associated with audit quality, and show that the parental leave policy effect is moderated by employee demographics that reflect labor economics and work-life conflict. My study informs academic literature and practitioners on the importance of managing audit firm culture, builds on the broader literature of economic impacts of paid family leave, and highlights one effective talent management strategy.



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