Resource allocation to engagement teams: Evidence from asset-backed securitization assurance services

Abstract

Human resource allocation to engagement teams is the key determinant of the efficiency and quality of assurance production. Employing a unique setting of bank-originated asset-backed securitization (ABS) assurances in China and hand-collected data on ABS assurance teams, we examine resource allocation at the team level among accounting firms that provide both ABS assurance services and financial statement audits to the same client bank, which we term “joint-provision accounting firms.” We find that, compared with accounting firms that provide ABS assurance services only, joint-provision firms allocate more auditors to their ABS assurance teams, but these auditors generally have less expertise. We further find that banks audited by joint-provision accounting firms tend to receive higher-quality financial statement audits. Additional analysis indicates that the workload of financial statement auditors and the banking specialization of accounting firms have moderating effects on the association between joint provision and team size (but not team expertise). These results broaden the understanding of dynamics of engagement teams and highlight the implication of resource allocation to other assurance services for financial audit quality.