The impact of auditors’ portfolio structure on audit effectiveness and fees

Purpose The purpose of this study is to examine the overall structure of the auditor’s portfolio and the factors that influence the productivity and effectiveness of audit operations. Design/methodology/approach Based on the information published by the companies admitted to the Tehran Stock Exchange, this study was conducted from 2014 to 2022 with a selected sample of 105 companies. The research hypotheses have been tested using panel regression models. Findings The results indicate that out of the five indicators introduced for auditor portfolio diversification, four of its variables, including auditor market share, auditor portfolio concentration on a specific industry, auditor portfolio diversification across industries and the degree of diversification in the auditor portfolio across categories of a specific industry, have a significant relationship with the audit process effectiveness measure. In addition, no significant relationship was observed between the auditor’s portfolio concentration index on a specific category in each industry and audit fees and, consequently, the effectiveness of the audit process. On the other hand, the composite auditor portfolio diversification index (Spec_New) also has a positive and significant relationship with audit fees and, consequently, audit process effectiveness, confirming the study’s results. Originality/value The paper examines the issue of audit productivity, which is an essential factor in determining the auditor’s competitiveness; second, it acknowledges a general view of the auditor’s portfolio structure and, therefore, the role of portfolio management in inducing audit productivity. The findings of this study help design the auditor’s portfolio and the competitiveness of audit firms in the market.