More women, better audits

By Alexandra Richter

BUFFALO, N.Y. — Audit teams with more women benefit firms and clients alike by delivering higher-quality audits at a lower cost, according to new research from the University at Buffalo School of Management.

Forthcoming in the Review of Accounting Studies, the research finds that audit teams with more women — particularly audit seniors (who serve as team supervisors, product managers and client service providers in addition to workpaper preparers) — consistently report fewer financial misstatements and charge lower audit fees.

“Research in teamwork dynamics shows that increasing the presence of women on teams can improve performance,” says study co-author, Brandon Szerwo, PhD, assistant professor of accounting and law in the UB School of Management. “And, evidence from psychology, economics and organizational behavior shows that many traits, behaviors and characteristics commonly associated with women, such as being more risk averse, cooperative and detailed in processing information, often lead to better results. We find consistent results in the audit industry.”

To understand how gender composition on audit teams affects outcomes, the researchers analyzed the proportion of female auditors across 20 large U.S. public accounting firms serving more than 4,700 clients from 2010 to 2018. Offices with a larger share of female auditors produced higher-quality audits, demonstrated by fewer financial misstatements, and produced these audits at a lower cost.

And, the study found that settings within and outside the workplace influence the relation between team gender composition and audit quality: women’s impact is strongest in supportive communities but wanes when there are fewer female partners.

“Our study provides important insights to the role of gender composition on teams and the positive influence of women that is amplified in supportive environments — and noticeably weaker in workplaces with fewer female partners or poor work-life balance,” says study co-author, Joshua Khavis, PhD, assistant professor of accounting and law in the UB School of Management.

The findings suggest a clear takeaway for firms: increasing female representation in the audit labor pipeline, particularly in senior staff roles, can strengthen audit practices — especially when more women perform audits in supportive environments and cultures.

Khavis and Szerwo collaborated on the study with Amy Sheneman, PhD, assistant professor of accounting and management information systems at The Ohio State University Fisher College of Business.