Ryan C. Ballestero, PhD

Working Papers:

 

"The Importance of Organizational Culture in Achieving Audit Quality: Evidence from the Adoption of Equalized Parental Leave"

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ABSTRACT: Large accounting firms invest considerable resources into talent management, yet we know little about whether, and when, such efforts are effective. In this study, I examine whether one specific talent management initiative that targets a firm’s organizational culture leads to higher audit quality. Specifically, I exploit the staggered adoption of equalized parental leave policies, which are designed to facilitate increased equality and inclusion, at three audit firms. I find that audit quality improves following the adoption of such policies. I additionally use a novel dataset of audit employee characteristics to examine how office-level employee demographics directly impact audit quality and moderate the effectiveness of such talent investments. I find evidence that staff auditor qualification is positively associated with audit quality, and show that the parental leave policy effect is moderated by local office employee demographics that reflect labor economics and employee work-life conflict. My study informs academic literature and practitioners on the importance of managing audit firm culture, builds on the broader literature of the economic impacts of paid family leave, and highlights one effective talent management strategy.

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• Job Market Paper

• Committee: Jaime Schmidt (Chair), Steven Kachelmeier, Nicholas Hallman, John McInnis, David Harrison

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"Does Auditor Involvement Expedite SEC Comment Letter Resolution?"

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ABSTRACT: The remediation of Securities and Exchange Commission (SEC) comment letters can impose significant costs on companies. This study examines whether auditor involvement in the SEC comment letter process expedites comment letter resolution. Such a finding would indicate that auditors add value outside of the annual financial statement audit. We measure auditor involvement by identifying whether the audit partner is copied on SEC correspondence, and validate such auditor involvement by showing that audit fees are higher when a partner is copied. First, we document that auditor involvement is more likely when the SEC’s comment letter relates to one or more accounting issues and when the audit partner has industry expertise. Then, we show that comment letters that copy the partner, especially a partner with greater experience, have reduced time to resolution. In particular, we show that copying the audit partner reduces the amount of time it takes the company to respond to a SEC comment letter and copying more experienced partners is associated with clearer responses to the SEC and shorter times to reach full resolution. We find no evidence that auditor reputation (e.g., partner titles or working in a firm’s national office) affects the likelihood of a company to copy the partner or the likelihood that the SEC will perceive the company’s response more favorably. Thus, our findings appear driven by actual rather than perceived auditor value.

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• With Jaime Schmidt, University of Texas at Austin

• Under review at The Accounting Review

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