Is Audit Behavior Contagious? Teamwork Experience and Audit Quality by Individual Auditors

In this paper, we demonstrate that bad audit behavior is transmitted through the teamwork experience of individual auditors. We find that auditors who have previously worked in a team (team auditors) with those who are sanctioned by the regulators for audit failure (contagious auditors) are more likely to issue lenient audit opinions, and their audited accounting numbers are more likely to be downward restated in the future, compared to those who have no overlap with contagious auditors in their teamwork experience. This contagion effect is, however, absent among auditors who previously worked in the same audit firm but not in the same team (colleague auditors) as contagious auditors. Our findings highlight the importance of analyzing social learning via teamwork experience in understanding how audit quality at the individual level is shaped.