Where does the time go? Auditors' commercial effort, professional effort, and audit quality

Audit theory and regulation assumes that auditors' commercial motivation threatens audit quality. In this registered report, we use data from two Big Four firms in the Netherlands and provide empirical evidence on the relation between auditors' commercial motivation and (1) compensation, (2) total audit effort, and (3) audit quality. We proxy commercial motivation as the time that individual auditors report allocating to commercial activities. We hypothesize that auditors' commercial effort is positively related to compensation and we find mixed support. Next, we hypothesize that auditors' commercial effort is negatively related to the audit effort but we find no support. Turning to audit quality, we hypothesize a negative direct relation between auditors' commercial effort and audit quality but we find no support. We also predict a positive indirect relation in which auditors' commercial effort increases quality control reliance leading to higher audit quality. We find some support for this hypothesis but only when we use technical consultations to proxy for quality control. Auditors with greater commercial effort maintain quality because they rely more on technical consultations. In sum, our study challenges the assumption that auditors' commercial effort threatens audit quality and questions the need for additional regulation to constrain commercial motivation.