The Pamplin College of Business is in the midst of a transformation. Going beyond education, Pamplin is paving the way to a research-based experience. Classes are only one side of the experience. In addition to teaching rigorous courses, Pamplin professors pursue comprehensive research-based answers to the most important questions in the business world.

“From a research perspective, Pamplin has been changing and evolving to become more research-focused,” said Dr. Sarah Stein, a Pamplin professor joining the college during an exciting period of change.

Seeking change from her career at Deloitte as an audit manager, Dr. Sarah Stein obtained her Ph.D. in accounting from the University of Missouri and joined Pamplin in August of 2013. As an Assistant Professor within the Department of Accounting and Information Systems, Dr. Stein teaches the undergraduate audit courses. Her move to Blacksburg has allowed her to “make a difference” in the lives of her students, while also enjoying the community and beautiful surroundings with her family. Dr. Stein said, “Blacksburg is an amazing place to live.”

During her time at Virginia Tech, Dr. Stein has also joined teams of researchers to examine interesting questions on a variety of auditing topics. Always trying to find the “why” and “how” behind the data, Dr. Stein’s forthcoming article in The Accounting Review seeks to understand how small accounting firms leverage their membership in accounting associations or networks.

“What we’re really getting at is the set of small firms outside the Big Four…the next group. These smaller firms are not located across the entire U.S.—they’re just not as big. They instead join together in associations to share their resources so that they can act like one of the bigger firms,” said Dr. Stein.

This study, titled A Field Study on Small Accounting Firm Membership in Associations and Networks: Implications for Audit Quality, used semi-structured interviews and other evidence from the field to examine the research question. “With a field study, you can get into the nitty gritty with a lot of rich detail,” said Dr. Stein. “We use the field study to get them to tell us, how are you benefiting from these memberships? Does membership in these associations affect the firm’s audit quality?” Dr. Stein’s research revealed that these smaller firms gain expertise and access to manpower, share firm management best practices, and also enhance their market legitimacy from their membership in these associations.

Yet, the research results have already produced new questions. Specifically, Dr. Stein and her coauthors noticed the paradoxical balance between competition and collaboration among the smaller firms in these associations and networks. “What we’re going with the second paper, is the biggest concern… these are legally separate firms that have their own clients and try to recruit their own people,” said Dr. Stein. “They’re competing with each other, but also collaborating with each other. How do they manage these tensions?”

Besides these studies, Dr. Stein highlighted another current research project titled What's in a Name? Initial Evidence of U.S. Audit Partner Identification Using Difference-In-Differences Analyses. This study examines the implications of a new rule enacted by the Public Company Accounting Oversight Board (PCAOB) that requires public disclosure of engagement partner names for all audits of publicly traded companies. This new rule went into effect during 2017.

“The PCAOB has long said, the partner is going to have more accountability if we make them officially sign their name on the opinion and take responsibility for the audit,” said Dr. Stein. “There’s research on accountability that suggests if you sign your name to something, you’re much more likely to do a good job and avoid negative outcomes.”

However, the final PCAOB rule did not require audit partner signatures in the audit opinion but instead requires disclosure in a separate form filed with the PCAOB (“Form AP”). Answering the question of whether these new requirements for partners to be identified affects audit quality or cost, her research revealed only slight changes.

“Our results actually indicate that there is no change in audit quality as a result of the disclosure, but we do see some evidence of an increase in fees,” said Dr. Stein. “We also see evidence that conservatism is increasing.”    

It’s more than just a paper, as Dr. Stein stated that “it has policy implications.” She will be presenting this research to staff and economists at the Securities and Exchange Commission on April 2.

As Pamplin pushes onward, Dr. Stein’s efforts help the momentum continue. Dr. Stein said she enjoys being a part of the change, and wants Pamplin to continue to reinvent our business perspectives.