The Effects of Auditor Social and Human Capital on Auditor Compensation: Evidence from the Italian Small Audit Firm Market

Pietro A. Bianchi, Nieves Carrera, Marco Trombetta

Research output: Contribution to journalArticlepeer-review

1 Scopus citations

Abstract

This study examines whether social and human capital influence the compensation of individual auditors in the small audit firm market. We employ a sample of Italian auditors and use measures from the network and auditing literatures to capture their professional connections, representing social capital, and their industry expertise, representing human capital. Our findings show a positive and economically meaningful association between these individual attributes and auditor compensation. We run several tests to address potential endogeneity issues in our research design. Our results suggest that, in the small audit market, clients perceive as valuable those auditors with higher social and human capital, and as a result, are willing to pay a premium for these specific auditor attributes.

Original languageEnglish (US)
Pages (from-to)693-721
Number of pages29
JournalEuropean Accounting Review
Volume29
Issue number4
DOIs
StatePublished - Aug 7 2020
Externally publishedYes

Keywords

  • Audit fees
  • Auditor compensation
  • Human capital
  • Small audit firm market
  • Social capital

ASJC Scopus subject areas

  • Accounting

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