Attractive Audit - Investigating attractiveness and height as determinants for auditor fees and compensation in a Swedish setting
Abstract: The purpose of this study is to investigate if auditors' individual characteristics; attractiveness and height, act as determinants for fee generation and compensation in the audit industry. The study is motivated by the observed institutional shift from a technical logic to business logic in audit industry, which leads to increased importance of personal qualifications such as interpersonal skills for auditors to be successful. Additionally, personal characteristics of individual auditors have not previously been investigated in relation to success using archival data. From the social stratification and social psychology literature, attractiveness and height have been found to be observable and significant indicators of professional success. The relationship between labor market outcomes, height, and attractiveness is channeled through the positive correlation with cognitive and non-cognitive abilities. Using an extensive sample of 121 audit engagement partners for public entities during the period of 2001-2013 in Sweden, we extend the well documented audit fee determinant model first developed by Simunic (1980) to include a rating of facial attractiveness and height. Additionally, we extend the model of implicit determinants for auditor compensation found by Knechel, et al. (2013) to include a rating of facial attractiveness and height. In relation to fees, the results indicate a significant positive relationship between height and fees with an associated increase in fees of 7% for every 10 cm in increased height. Facial attractiveness are found to be insignificant in explaining the level of fees. In relation to compensation, the results indicate a 7% increase in earnings for every 10 cm of increase in height and a 5% increase in earnings for every 10% increase in attractiveness. The results speak in favor of including personal characteristics as determinants when investigating fees and compensation in the audit profession.
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