Does the educational background of a certified auditor matter? A joint study from Bocconi University, Milan, and University of Cambridge finds that it does. Auditors with an undergraduate university degree emphasizing quantitative analysis, such as accounting, business, engineering, mathematics or economics, produce more accurate audited financial reports (as measured by levels of abnormal accruals recorded) than do auditors with a bachelor’s in fields with a more qualitative approach, such as law, classics, or history.
There has been a shift toward more business-context grounded auditing practice in recent years, bringing a suggestion that auditors who enjoy the qualitative skills in critical thinking and research provided by a humanities background might have the advantage. While they acknowledge that it is difficult to account for soft (inter-personal and management) skills and innate intelligence bias, the authors of this study find that this is not the case.
Does holding a background degree specifically related to accounting offer yet greater advantage? The study finds that while audit partners with accounting degrees are associated with more accurate audited financial reports than their counterparts with qualitative degrees, they are not better than those with other quantitative degrees.
Companies, moreover, pay for the privilege. Auditors with a degree in a quantitative subject (including those who specialize in accounting) charge higher fees than their humanities-educated counterparts.
The analysis looked at the educational background of auditors operating in the UK in years 2011 – when disclosure of a lead auditors’ name became mandatory – to 2014. Regulations in the UK allow individuals from any degree discipline (and some without) to train to be an auditor. This is the first study of its kind in a Western economy and should be useful to educators and regulators – as well as employers and potential auditing trainees.
This paper is co-authored by Jenny Chu (Cambridge Judge Business School, University of Cambridge, Cambridge, UK), Annita Florou (Department of Accounting, Bocconi University, Milan, Italy) and Peter F. Pope (Department of Accounting, Bocconi University, Milan, Italy) and is forthcoming at the European Accounting Review.
