Do Audit Offices Improve Audit Quality Through Accumulated Audit Knowledge?

The auditing profession argues that long tenure allows for knowledge accumulation, which improves audit quality. This study draws from organizational theory to examine whether one client’s audit quality can benefit from the auditor’s accumulated audit knowledge acquired through tenure with other clients at the audit office level (i.e., not client-specific). I find negative associations between accumulated office-level audit knowledge and client financial misstatements, Big R misstatements, and missed material weaknesses. I also find that clients whose audit offices have more accumulated office-level audit knowledge have lower absolute discretionary accruals. Overall, these results support the notion that accumulated office-level audit knowledge contributes to clients’ audit quality within the office