ART I C L E
Is professional exam performance associated with
career success for Big 4 auditors? Evidence
on gender differences
Antti Fredriksson1 | David Hay2,3 | Jukka Karjalainen4† |
Arpine Maghakyan5 | Lasse Niemi3
1University of Turku, Turku, Finland
2University of Auckland Business School,
Auckland, New Zealand
3Aalto University, Espoo, Finland
4University of Eastern Finland, Kuopio,
Finland
5University of Glasgow, Glasgow, UK
Correspondence
Lasse Niemi, School of Business, Department
of Accounting, Aalto University, P.O. Box
21220, FIN-00076 Espoo, Finland.
Email: lasse.niemi@aalto.fi
Funding information
HSE Support Foundation; OP-Pohjola Group
Research Foundation
Abstract
This study examines whether better performance on the
Certified Public Accountant (CPA) exam is associated with
an auditor’s career success and whether any relation differs
based on gender. Our study adds to prior studies on the
career development of auditors by showing that the audi-
tor’s performance on the exam predicts success during the
auditor’s career. Although there is little difference in the
average CPA exam scores of male versus female auditors,
we document gender differences in the relation between per-
formance on the CPA exam and career success. Male audi-
tors who pass the exam with superior results receive higher
annual compensation than those with weaker results. They
are also more likely to become partners in Big 4 accounting
firms and have larger client portfolios. For female auditors,
we find weaker or no association between CPA exam scores
and compensation or other indicators of career success. Our
path analysis shows that the mechanisms underlying career
success work differently for men and women. CPA exam
scores of male auditors have a direct effect on compensation
and an indirect (mediating) effect through promotion to
partner and client portfolio size. However, for female audi-
tors, exam scores have no effect on promotion to partner or
client portfolio size, and exam scores have a much smaller
effect on compensation. Our findings suggest that CPA
exam scores translate into career success for male auditors
but not for female auditors.
Accepted by Linda Myers.
†Deceased August 4, 2019.
Received: 5 April 2019 Accepted: 17 January 2025
DOI: 10.1111/1911-3846.13035
This is an open access article under the terms of the Creative Commons Attribution License, which permits use, distribution and
reproduction in any medium, provided the original work is properly cited.
© 2025 The Author(s). Contemporary Accounting Research published by Wiley Periodicals LLC on behalf of Canadian Academic
Accounting Association.
Contemp Account Res. 2025;42:1243–1270. wileyonlinelibrary.com/journal/care 1243
KEYWORDS
auditor careers, career success, Certified Public Accountant (CPA) exam,
female accountants, gender differences, professional examinations
Les résultats à un examen d’agrément
professionnel sont-ils associés à une carrière
fructueuse chez les auditeurs des 4 gros cabinets?
Données probantes sur les différences
entre les sexes
Résumé
La présente étude vérifie si de bons résultats à l’examen de
Certified Public Accountant (expert-comptable agréé aux

Etats-Unis) (CPA) sont associés à la réussite professionnelle
des auditeurs, et si certains liens varient en fonction du sexe.
Notre étude complète la recherche antérieure sur l’évolution
de carrière des auditeurs en montrant que les résultats d’un
auditeur à l’examen prédisent la réussite de sa carrière. Bien
qu’il n’y ait qu’un léger écart entre les auditeurs et les
auditrices sur le plan des notes moyennes à l’examen de
CPA, nous établissons certaines différences entre les sexes
concernant le lien entre les résultats à l’examen de CPA et
la réussite professionnelle. Les auditeurs de sexe masculin
qui obtiennent de bonnes notes à l’examen reçoivent une
meilleure rémunération annuelle que ceux qui ont obtenu
des notes plus faibles. Ils sont aussi plus susceptibles de
devenir associés dans un des 4 grands cabinets comptables
et d’avoir des portefeuilles de clients importants. En ce qui
concerne les auditrices, nous dégageons un lien plus faible
ou inexistant entre les notes obtenues à l’examen de CPA et
la rémunération ou d’autres indicateurs de la réussite
professionnelle. Notre analyse des trajectoires montre que
les mécanismes qui sous-tendent la réussite professionnelle
fonctionnent différemment pour les hommes et pour les
femmes. Les notes des auditeurs à l’examen de CPA ont
une incidence directe sur la rémunération et un effet indirect
(médiateur) sur la promotion au rang d’associé et la taille
des portefeuilles des clients. Toutefois, pour les auditrices,
les notes à l’examen n’ont aucune incidence sur la promo-
tion au rang d’associée et la taille des portefeuilles des cli-
ents, et un effet beaucoup plus ténu sur la rémunération.
Nos résultats portent à croire que les notes à l’examen de
CPA favorisent la réussite professionnelle des auditeurs,
mais pas celle des auditrices.
MOTS - C L É S
carrière des auditeurs, comptables de sexe féminin, différences entre les
sexes, examen de Certified Public Accountant (CPA), examens
d’agrément professionnel, réussite professionnelle
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1 | INTRODUCTION
The business community generally accepts that professional examinations are required to
ensure that auditors are sufficiently competent to perform their duties (AICPA, 2018; Interna-
tional Accounting Education Standards Board [IAESB], 2019).1 In most countries, regulations
authorize only those who pass the Certified Public Accountant (CPA) exam (or equivalent) to
practice auditing. However, passing the CPA exam is a considerable hurdle for some candi-
dates. Therefore, it is worthwhile to know whether CPA exam scores translate into subsequent
career success for auditing candidates. This motivates our first research question: whether and
how CPA exam performance is associated with subsequent career success in auditing.2 Our
study also contributes to the topical issue of the challenges faced by female auditors. Female
auditors are often perceived as having fewer opportunities for career advancement compared to
their male counterparts (Almer et al., 2021; Hardies, Lennox, et al., 2021). Differences in career
success between men and women motivate our second research question: do differences between
genders play a role in the relations between performance on the CPA exam and career success
in auditing?
Although professional requirements mandate an exam or similar test of competence for
auditors, it is not clear whether exam results are associated with career success. To pass the
exam, a candidate must acquire sufficient technical knowledge in accounting and auditing.
Successful candidates invest a considerable amount of time and effort in becoming licensed
accounting professionals. Setting and administering CPA exams also pose significant costs for
the accounting profession. Previous research shows that other factors, such as effort (Ciconte
et al., 2024), soft skills (Bol et al., 2018; Coram & Robinson, 2017), and networking (Downar
et al., 2021) are important. We are not aware of research that examines the career success of
individuals and investigates whether it relates to their exam results. With regard to female audi-
tors, women earn less than men (Blau & Kahn, 2017; Cha & Weeden, 2014; Goldin, 2014;
Weichselbaumer & Winter-Ebmer, 2005) and the auditing profession is not immune to this phe-
nomenon (Dong, 2022; Knechel et al., 2013; Vandenhaute et al., 2020). Other research suggests
that they face disadvantages in their careers (Barnes et al., 2024; Hardies et al., 2016; Lennox &
Wu, 2018), and it may be that women with similar exam scores to men may not have similar
career success.
Similar to standardized tests that universities use in admissions screening, such as the Grad-
uate Management Admission Test (GMAT), the CPA exam can be thought of as a simple
device for identifying people who are more talented or capable than others (Rosen, 2008;
Spence, 1973). However, unlike the GMAT, which candidates take before admission to an aca-
demic program and which aims to measure more generic cognitive abilities, the CPA exam is
taken after the candidate completes academic education requirements and gains professional
experience, and it aims to assess the candidate’s knowledge in the specific domain of accounting
and auditing. The professional requirements are intended to protect the public interest, presum-
ably from poor-quality auditing. For example, AICPA (2018) asserts that “[t]he purpose of the
Uniform CPA Examination is to provide reasonable assurance [. . .] that those who pass the
CPA Examination possess the level of technical knowledge and the skills necessary for initial
licensure in protection of the public interest.” The IAESB (2019) makes a similar statement.
Our Finnish setting provides us with a unique data set that facilitates tests for the relations
between CPA exam scores, compensation, and other career outcomes. Our data set comprises
3,761 auditor-year observations, from 476 unique Big 4 auditors, from 2003 to 2016. First, we
1We use the term “auditor” to refer to an authorized public accountant, that is, an individual who has passed the Certified Public
Accountant (CPA) exam and is listed in the auditor registry.
2Because passing the CPA exam is required to practice auditing, we cannot use passing the exam as the basis for our analysis. Instead,
we study whether those candidates that passed the exam (i.e., CPAs) with better scores later have better career success in auditing
compared to their less successful peers.
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hand-collect the CPA exam scores for all auditors from the archives of the Auditing Board,
which is a body that oversees the auditing profession. Second, to measure compensation, we
obtain annual income data for individual auditors from the tax authorities. Third, because
Finland’s Company Law requires that all companies file their financial statements and audit
reports in a public register, we can identify the auditors of listed and private companies. This
allows us to calculate complete client portfolios for the auditors in our sample. Like many other
European countries (Downar et al., 2021), in Finland, auditors who are not partners can have
their own client portfolios and sign audit reports, allowing us to identify when auditors are pro-
moted to partner.
We examine whether CPA exam scores are correlated with the compensation of Big 4 audi-
tors and whether gender moderates this association. CPA exam scores can affect compensation
directly or indirectly, through other outcomes of career success, or both directly and indirectly.3
Career success in the auditing profession can take several forms. In addition to compensation,
promotion to audit partner in a Big 4 firm and having large or prestigious clients are regarded
as career success (Baysden & Wilson, 2014; Carter et al., 2014; Downar et al., 2021; Knechel
et al., 2013; Qiang et al., 2017).4 Whether the auditing profession discriminates against female
auditors is another important current issue (Almer et al., 2021; Hardies, Lennox, et al., 2021).
This motivates us to examine whether the mechanism by which CPA exam scores influence
compensation differs for female versus male auditors.
Our tests show a positive association between exam scores and career outcomes. However,
our analyses reveal that this association applies primarily to men. We find that male Big
4 signing auditors who achieved higher scores when they passed the exam also earn more, are
more likely to be promoted to partner in Big 4 accounting firms, have larger client portfolios,
and audit more prestigious clients than male Big 4 signing auditors who achieved lower CPA
exam scores. Moreover, our path analysis shows that higher exam scores are associated with
higher compensation, both directly and indirectly through promotion to Big 4 partner and port-
folio size. The results differ for women. For female auditors, we do not find an indirect relation
between CPA exam scores and compensation through other career outcomes such as promotion
to a Big 4 partner or portfolio size, and the direct relation between exam performance and com-
pensation is much smaller for women than for men. In sum, we find that CPA exam scores are
positively associated with subsequent career success, but mainly for male auditors, indicating
important gender differences in how auditors build their careers in Big 4 accounting firms.
This study contributes to existing literature in several ways. Our response to the first
research question adds to the literature on factors leading to career success in auditing
(Bol et al., 2018; Ciconte et al., 2024; Coram & Robinson, 2017; Downar et al., 2021).5 Coram
and Robinson (2017) show that sophisticated performance measurement systems are used by
audit firms to measure the contribution of individual partners. Bol et al. (2018) show that firms
value the tacit knowledge of both experienced and inexperienced auditors. Downar et al. (2021)
examine promotion to partner in Big 4 accounting firms in Germany. The authors find that
winning new prestigious clients, engaging in formal and informal networking activities, and a
3Careers of CPAs are not limited to public accounting. Alternative career paths include being accountants in industry, providing
advisory services, and being executives of corporations. The CPA exam’s stated purpose, however, is to guarantee that public
accountants possess sufficient competence as auditors to protect the public from the effects of poor-quality auditing. Our study is
motivated by this stated purpose of the CPA exam and therefore we limit our study to CPAs’ career success as auditors.
4Media and research on gender differences in career success in auditing often use Big 4 partner status as an indicator of career success
(Khlif & Achek, 2017; Lennox & Wu, 2018). We acknowledge that not every auditor wants to become a Big 4 partner (Jones &
Iyer, 2020) but many sources support the view that this is a common auditor goal (Baysden & Wilson, 2014; Carter et al., 2014; Qiang
et al., 2017).
5There are a number of studies that examine the effects on the labor market for auditors by investigating the effect of the change to a
150-hour requirement in the United States (Allen & Woodland, 2010; Barrios, 2022; Gramling & Rosman, 2013; Jevons Lee et al., 1999)
Many of the previous studies examined a single issue, the introduction in the United States of the 150-hour requirement for CPAs.
Several studies found that this change led to restrictions on the supply of audit staff (Allen & Woodland, 2010; Barrios, 2022; Jevons Lee
et al., 1999) However, these studies are silent about the factors leading to career success for individual auditors.
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higher social status due to academic and professional credentials increase the likelihood of
being promoted to Big 4 partner. Ciconte et al. (2024) examine auditors’ commercial effort and
show some support for auditors’ commercial effort being related to audit quality. Our study
extends the previous studies by showing that CPA exam scores are another important driver of
career success. These scores predict promotion to partner, client portfolio, and compensation.
Hence, our study adds to prior research on the career development of auditors by showing that
an auditor’s performance on the exam predicts success throughout their career.
Our study also adds to the scarce evidence on auditor compensation. Knechel et al. (2013)
examine the determinants of compensation for the Big 4 audit partners in Sweden. Regarding
partner-specific compensation, the authors find that the size of the personal client portfolio,
acquisition of new clients, expert knowledge, and industry specialization are associated with
higher compensation. We extend the findings in Knechel et al. (2013) by showing that success
in the CPA exam predicts these observable career outcomes related to the auditor’s personal
compensation. Our findings are consistent with the view that the same characteristics that are
related to success in the professional exam remain important for compensation during the audi-
tor’s career.
In our response to the second research question, we contribute to an emerging stream
of research on gender effects (Hossain et al., 2018; Hottegindre et al., 2017; Ittonen
et al., 2013; Ittonen & Peni, 2012; Niskanen et al., 2011; Yang et al., 2018) and gender dis-
crimination in auditing (Almer et al., 2021; Hardies, Lennox, et al., 2021). Lennox and Wu
(2018) suggest that gender discrimination against female accountants is an important topic
because accounting firms face allegations that they deny highly qualified females the oppor-
tunity to be promoted to partner or to work on prestigious engagements, and that they
base promotion decisions on networking at events that tend to be male-oriented. Recent
studies on gender effects find that Big 4 accounting firms are less likely to promote women
to partner (Almer et al., 2022; Downar et al., 2021) and that women tend to audit less
prestigious clients (Almer et al., 2021) and earn less than men (Dong, 2022; Knechel
et al., 2013).6 Female audit partners in Belgium receive lower compensation than male part-
ners and have to meet higher performance thresholds (Hardies, Lennox, et al., 2021). Our
study confirms these findings. Our data show, however, that women perform as well as
men on the CPA exam. Surprisingly, although success in the CPA exam translates into sub-
sequent success for men, it does not do so for women. Our findings on how performance
on the CPA exam translates into career success for men but not women contribute to the
understanding of gender bias in the auditing profession.
2 | LITERATURE AND DEVELOPMENT OF HYPOTHESES
The IAESB, which is an independent board supported by the International Federation of
Accountants, prescribes educational requirements for entry into the accounting profession
worldwide. It states that a formal assessment of professional competence should occur before
admission to the accounting profession. This assessment should be highly reliable and be based
on verifiable evidence (IAESB, 2019, IES 6, 80). The CPA exam is designed to measure techni-
cal knowledge and skills related to accounting and auditing. It tests how well the candidate
understands and can apply accounting principles and financial reporting standards, as well as
the requirements of relevant legislation (e.g., company law). It also tests the candidate’s
6Other results of previous research on gender effects are mixed. They show that female auditors have lower audit quality in Australia
(Hossain et al., 2018), but higher audit quality in Sweden and Finland (Ittonen et al., 2013; Mnif & Cherif, 2023). with mixed results in
China (Yang et al., 2018) and in an early study in Finland (Niskanen et al., 2011). Women commit different types of disciplinary
offenses than men (Hottegindre et al., 2017) and receive higher audit fees (Ittonen & Peni, 2012).
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knowledge of professional auditing standards (International Standards on Auditing) and how
well the candidate can apply these standards.
Whether CPA exam results are associated with career success depends on whether account-
ing firms acknowledge and value the competencies that correlate with CPA exam scores. It is
not given that CPA exam performance would be associated with an auditor’s career success.7
Big 4 job performance evaluations are not limited to the knowledge tested in the CPA exam.
An auditor’s compensation is also related to effort (Ciconte et al., 2024). Firms also assess “soft
skills” including the teamwork, leadership, and communication skills of their auditors
(Bol et al., 2018; Coram & Robinson, 2017). These soft skills can also be very important for a
person’s career (Heckman & Kautz, 2012; Seibert et al., 2001; Todd et al., 2009; Wolff &
Moser, 2009).8 In a study of auditors’ career paths, Downar et al. (2021) find that in addition to
making money for the firm, networking (or “knowing the right people”) also matters for career
success. Although these other factors may also be important, we investigate whether auditor
performance on the CPA exam is associated with career success. Specifically, we investigate
whether auditors who score higher on the exam earn more, are more likely to be promoted to
partner, and receive more demanding and complex audit engagements. This leads to our first
hypothesis, stated in the alternative.
Hypothesis 1 (H1). CPA exam performance is positively associated with career suc-
cess in auditing.
In general, women earn less than men (Blau & Kahn, 2017; Cha & Weeden, 2014;
Goldin, 2014; Weichselbaumer & Winter-Ebmer, 2005), and this holds for the auditing pro-
fession (Dong, 2022; Knechel et al., 2013; Vandenhaute et al., 2020). Even when female
Big 4 auditors provide higher-quality audits (Hardies et al., 2016) and charge higher audit
fees (Hardies, Lennox, et al., 2021), they are less successful in being promoted to partner
(Almer et al., 2022; Downar et al., 2021; Lennox & Wu, 2018), are less likely to audit
prestigious clients (Almer et al., 2021; Hardies, Lennox, et al., 2021), and face obstacles
that men do not encounter (Barker & Monks, 1998). Obstacles can arise because female
auditors are more likely than their male counterparts to prioritize factors other than the
commercial aspects of auditing (Jonnergård et al., 2010). Alternatively, work–life balance
might play a role (Barnes et al., 2024; Ghio et al., 2023; Jones & Iyer, 2020). Although
some women have been able to break the “glass ceiling” and overcome these obstacles
(Almer et al., 2021), their success can be costly to their personal lives (Barker &
Monks, 1998; Folke & Rickne, 2020). In either case, women with similar exam scores to
men may not have similar career success. Meanwhile, the Big 4 accounting firms have
made public commitments to support gender diversity (Kornberger et al., 2010;
Quattrocelli, 2020). The prevailing view suggesting that women face disadvantages in their
careers leads to our second hypothesis, stated in the alternative.
Hypothesis 2 (H2). The positive association between CPA exam performance and
career success in auditing is weaker for female auditors than for male auditors.
7It is possible that CPA exam results do not sufficiently distinguish between those who pass the exam because the exam may simply be a
mechanism to screen out those who do not reach the minimum technical competence for a professional auditor.
8Heckman and Kautz (2012) conclude that: “The larger message of this paper is that soft skills predict success in life, that they causally
produce that success, and that programs that enhance soft skills have an important place in an effective portfolio of public policies.”
However, they do not refer to accountants, and their data come from studies of the wider population. Seibert et al. (2001) study how
social capital affects career success. They do not examine accounting careers. Todd et al. (2009) find that political skill contributed to
career outcomes for a wide range of occupations. Wolff and Moser (2009) find that networking was related to career success for
participants from a wide range of industrial sectors.
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3 | RESEARCH DESIGN
We test our hypotheses in two steps. First, we estimate a set of regressions that regress auditor
compensation and other indicators of career success on CPA exam scores. To test for gender
differences in the relation between CPA exam scores and career outcomes, we interact CPA
exam scores with an indicator variable for gender. Second, to further analyze the association
between CPA exam scores and compensation, we employ path analysis and examine the roles
of other career outcomes as mediators. Again, we test the moderating effect of gender on all
paths in our model.
3.1 | Test variable (EXAMSCORE)
To measure the exam score, we compute the mean value of all components of the licensure test
for each passing CPA. We standardize exam scores using the Standard Nine method
(Thorndike, 1982). We categorize the yearly mean scores into nine stanines. These stanines pro-
vide a standardized scale ranging from 1 (the lowest standardized score category) to
9 (the highest standardized score category).
3.2 | Career outcome analysis
We expect CPA exam scores to be related to compensation and other career successes (H1). To
test this, we regress career outcomes on our test variable (EXAMSCORE).
CAREEROUTCOMEa,t¼ α0þα1EXAMSCOREaþα2FEMALEa
þα3EXAMSCOREaFEMALEaþα4SWEDISHaþα5LNEXPa,t
þα6RETAKEaþ κYEARþῳEXAMYEARþ εa,t:
ð1Þ
The subscripts a and t refer to the individual signing auditor from a Big 4 accounting firm and
time, respectively. The test variable EXAMSCORE is the standardized CPA exam score. To
examine the effect of auditor gender, we include FEMALE, which indicates female signing
auditors, and we create an interaction variable, EXAMSCORE  FEMALE, to examine
whether the relation between the exam score and career outcomes varies with gender (H2).9 To
control for differences related to ethnic backgrounds between the Finnish-speaking majority
and the Swedish-speaking minority, we include SWEDISH, which indicates Swedish-speaking
auditors. We also control for work experience, LNEXP, which we calculate as the log of one
plus the number of years to date since the auditor has passed the CPA exam. In addition, we
control for the fact that some individuals did not pass the exam on their first attempt by includ-
ing RETAKE to indicate that more than one attempt was needed. Finally, the estimations
include fiscal year, YEAR, and exam year, EXAMYEAR, fixed effects to control for differences
in compensation and other career outcomes across time.
In Equation (1), the main CAREER OUTCOME dependent variable is compensation,
LNCOMP, calculated as the natural logarithm of the total earned income (in euros) of auditor
a in year t. We also estimate the equation with seven other CAREER OUTCOME variables:
promotion to partner, portfolio size, industry specialization, working in the capital area, aver-
age client size, client risk, and leadership role.
9In an untabulated test, we also estimate the same equation (without FEMALE) for subsamples of female and male auditors.
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A major step in a Big 4 auditor’s career is promotion to partner (Carter et al., 2014; Downar
et al., 2021; Meuwissen, 1998). We use an indicator for whether the signing auditor is promoted
to audit partner (PARTNER) as a CAREER OUTCOME in Equation (1). Another important
indicator of career success is the auditor’s portfolio of clients. Auditors in charge of audits of
larger and more prestigious clients are considered to be more successful (Jones & Iyer, 2020).
Having a larger client portfolio and more prestigious clients also affects auditor compensation
(Knechel et al., 2013; Vandenhaute et al., 2020). We estimate Equation (1) using the auditor’s
client portfolio size, LNPORTF, as a CAREER OUTCOME. We calculate LNPORTF as the
natural logarithm of the sum of the total assets (in euros) of clients audited by auditor a in
year t.
In addition to compensation (LNCOMP), partner status (PARTNER), and size of the client
portfolio (LNPORTF), we estimate Equation (1) using other potential career outcomes: indus-
try specialization (IND_SPEC), work in the capital area (CAPITAL_AREA), average client
size (AVSIZE), average client risk (AVRISK), and leadership roles measured as being the
signing auditor for one or more listed companies (LEADERSHIP). Each measure indicates
increased responsibility and status within the firm. We make inferences about how auditors’
CPA exam performance is related to career success in Big 4 accounting firms based on the
results from these eight separate regressions.
3.3 | Path analysis equations
Next, we employ path analysis to examine whether the effect of CPA exam scores on compensa-
tion is transmitted through promotion to Big 4 audit partner (PARTNER) and/or client portfo-
lio size (LNPORTF). Figure 1 shows our path analysis model, in which all paths are
conditioned by gender. In our model, there are paths from EXAMSCORE to compensation
(LNCOMP) (c01), promotion to partner (PARTNER) (a1), and client portfolio size
(LNPORTF) (a2). The model also considers the path from promotion to portfolio size
F I GURE 1 Diagram of the path analysis model. This figure shows direct and indirect paths between
EXAMSCORE and LNCOMP mediated by PARTNER and LNPORTF, moderated by FEMALE.
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nline Library on [26/06/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on W
iley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License
(LNPORTF) (d21) and the paths from mediators (PARTNER and LNPORTF) to compensation
(b1, b2). In sum, in addition to the direct effect, there are three pathways by which
EXAMSCORE can influence compensation: through PARTNER, through LNPORTF, and
through both PARTNER and LNPORTF. To test H2, all paths are conditioned by introducing
FEMALE as a moderator variable.
We use a system of equations to deconstruct the association between exam scores
(EXAMSCORE) and annual auditor compensation (LNCOMP) into direct and indirect paths.
Equations (2–4) examine the relations among individual auditor characteristics, exam perfor-
mance, and career outcomes. Equation (2) examines the relation between an individual Big
4 auditor’s exam performance (EXAMSCORE) and the likelihood of promotion to partner
(PARTNER), moderated by gender (FEMALE).
PARTNERa,t¼ im1þα1EXAMSCOREaþα13EXAMSCOREaFEMALEaþ e11FEMALEa
þe12SWEDISHaþ e13LNEXPa,tþ e14RETAKEaþ κYEAR
þῳEXAMYEARþ εa,t:
(2Þ
Equation (3) examines the impact of exam score (EXAMSCORE) and partner status (PART-
NER) on an auditor’s portfolio size (LNPORTF), moderated by gender (FEMALE).
LNPORTFa,t¼ im2þα2EXAMSCOREaþd21PARTNERa,tþα23EXAMSCOREaFEMALEa
þd3PARTNERa,tFEMALEaþe21FEMALEaþ e22SWEDISHa
þe23LNEXPa,tþe24RETAKEaþ κYEARþῳEXAMYEARþ εa,t:
(3Þ
Equation (4) examines the impact of exam score (EXAMSCORE), partner status (PARTNER),
and portfolio size (LNPORTF) on auditor compensation (LNCOMP), moderated by gender
(FEMALE).
LNCOMPa,t¼ iyþ c01EXAMSCOREaþb1PARTNERa,tþb2LNPORTFa,t
þc03EXAMSCOREaFEMALEaþb13PARTNERa,tFEMALEa
þb23LNPORTFa,tFEMALEaþ e31FEMALEaþ e32SWEDISHa
þe33LNEXPa,tþ e34RETAKEaþ κYEARþῳEXAMYEARþ εa,t:
ð4Þ
In all equations, we control for additional variables, including ethnicity (SWEDISH), work
experience (LNEXP), and an indicator for whether the candidate made more than one attempt
to pass the exam (RETAKE), as well as fiscal year (YEAR) and exam year (EXAMYEAR) fixed
effects. Subscripts a and t refer to the individual auditor and time, respectively. We also exam-
ine to what extent each direct or indirect relation is moderated by gender (FEMALE). We also
explore alternative mediators and their simultaneous effects to assess the robustness of our find-
ings. Appendix 1 provides all variable definitions.
4 | DATA AND DESCRIPTIVE STATISTICS
We compile data from various sources, merging it using a unique auditor identifier. We present
descriptive statistics at both the auditor and auditor-year levels, allowing us to distinguish
between characteristics that are time-invariant and those that vary over time.
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edical Publications Ltd, W
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4.1 | Data
We source the audit information for our Finnish sample companies from Suomen Asiakastieto
Oy, a credit agency. The data set includes auditor names, associated accounting firms, and
licensure types. Next, we gather financial statement data and other financial information for all
Finnish companies from the ORBIS database maintained by Bureau van Dijk. These data
allow us to form each CPA’s annual client portfolio of public and private client companies and
to compute the necessary variables at the client portfolio level. See Appendix 2 for an explana-
tion of CPA exams, licensure types, and careers in Finland.
We merge our data sets from the Finnish Tax Administration, the Auditing Board archives,
and information on the auditors’ gender, Big 4 promotion, and ethnicity from the auditor registry
archives maintained by the Central Chamber of Commerce in Finland. When an individual takes
multiple attempts to pass the exam, we include only the latest result. We limit our sample to Big
4 auditors to ensure better comparability between auditors. This selection is supported by findings
that becoming a Big 4 audit partner is viewed as an aspirational goal for many CPAs (Baysden &
Wilson, 2014). Moreover, the majority of CPAs are affiliated with Big 4 accounting firms. Our
final data set comprises 3,761 auditor-year observations from 476 unique Big 4 auditors.
4.2 | Descriptive statistics
Table 1 presents descriptive statistics for our sample of observations from 2003 to 2016. The data
set includes only signing auditors—both partners and non-partners—working for the Big
4 accounting firms.10 Most auditors in charge of audit engagements are not partners, as indicated
by the mean value (0.400) of PARTNER. On average, signing auditors working for Big 4 account-
ing firms receive annual compensation of €118,000 (with a median of €82,000), ranging from
€3,000 to €824,000.11 The mean value of FEMALE is 32.4%, indicating that just below one third
of sample observations are female. Of the 476 auditors in our sample, 11.8% belong to the Swed-
ish minority group, and 30.5% took more than one attempt to pass the CPA exam. Approxi-
mately 55.3% of audit reports are signed by auditors working in the Helsinki capital area.
Table 2 presents mean values of our variables categorized by CPA exam score stanines, pro-
viding univariate insights into the relation between exam scores and our other variables of inter-
est. The rightmost column in each panel displays the results of a trend test across the stanines to
assess whether a significant trend across the CPA exam score stanines exists. The data show an
increase in the number of signing auditors elevated to partner status as exam scores rise, offer-
ing univariate evidence of a positive correlation between exam score and appointment to part-
ner. In the lowest exam score stanine, only 23.0% of signing auditors attain partner status, but
in the highest stanine, this figure increases to 47.1%. Furthermore, signing auditors with higher
exam scores receive higher compensation, providing preliminary univariate evidence of a posi-
tive correlation between compensation level and exam score. Additionally, auditors with higher
exam scores tend to have larger portfolios, with more prestigious and riskier clients,12 and are
predominantly based in the capital area.
Table 3 presents descriptive analyses by gender. Panel A shows that the mean values of
exam scores for female and male signing auditors are not significantly different. Similarly, we
10In Finland, a CPA is eligible to sign an audit report but accounting firms have different policies on which CPAs can sign audit reports.
For clarity we use the term CPA, although the designation used in Finland is KHT (as discussed in Appendix 2).
11There is one auditor-year observation with zero income, which we exclude from the analysis, but this CPA earns a normal amount of
annual income in other years. CPAs in our sample occasionally have exceptionally low income for 1 year, returning to normal in other
years. In a sensitivity test, we find that our inferences regarding compensation remain the same after we remove 18 auditor-year
observations with compensation below €25,000.
12AVRISK measures the Altman (2013) Z-score so that higher values represent lower risk.
1252 CONTEMPORARY ACCOUNTING RESEARCH
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nloaded from
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iley.com
/doi/10.1111/1911-3846.13035 by D
uodecim
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edical Publications Ltd, W
iley O
nline Library on [26/06/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on W
iley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License
find no significant gender difference in the proportion of Swedish-speaking auditors or the num-
ber of attempts required to pass the exam. Panel B illustrates that the average compensation for
female signing auditors is lower than that of their male counterparts. The average compensation
for a female partner is €152,459, whereas male partners’ average compensation is €187,715, and
the difference is statistically significant. The panel also highlights that female signing auditors
are less likely to reach partner positions, at 27.1% versus 45.4% for male signing auditors.
Engagements signed by female auditors tend to be larger but less risky, on average. Neverthe-
less, a comparison of mean values for LEADERSHIP indicates that female auditors have fewer
listed company clients. This finding is consistent with findings in recent studies indicating that
female auditors are less likely than male auditors to manage portfolios of prestigious clients
(Almer et al., 2021). Moreover, female auditors manage smaller client portfolios (LNPORTF).
Other comparisons indicate that female auditors have less industry specialization, a higher like-
lihood of being in the capital area, and less experience.
We supplement Table 3 descriptives with gender using two graphs. Figure 2 reports the pro-
portions of male and female auditors promoted to Big 4 partner. It shows that the proportion
of male auditors promoted to partner is consistently higher across all exam score stanines.
Figure 3 reports the average compensation of Big 4 auditors by gender and across exam scores.
It demonstrates that, on average, male auditors receive higher compensation across all exam
score stanines, especially in the two stanines with the highest scores.
5 | RESULTS
In this section, we present the results from tests of our two hypotheses: that performance on the
CPA exam is positively associated with career success in auditing (H1) and that this positive
association is weaker for female auditors than for male auditors (H2). We first regress auditor
compensation and other measures of career success on CPA exam scores. To assess whether
TABLE 1 Univariate descriptive statistics.
Panel A: Auditor level (N = 476)
Mean SD Min Q1 Median Q3 Max
EXAMSCORE 5.092 1.994 1.000 4.000 5.000 6.000 9.000
FEMALE 0.324 0.468 0.000 0.000 0.000 1.000 1.000
SWEDISH 0.118 0.323 0.000 0.000 0.000 0.000 1.000
RETAKE 0.305 0.461 0.000 0.000 0.000 1.000 1.000
Panel B: Auditor-year level (N = 3,761)
Mean SD Min Q1 Median Q3 Max
LNCOMP 11.470 0.596 8.096 11.061 11.310 11.823 13.622
PARTNER 0.400 0.490 0.000 0.000 0.000 1.000 1.000
LNPORTF 18.945 2.357 7.831 17.554 19.093 20.664 24.558
IND_SPEC 0.161 0.368 0.000 0.000 0.000 0.000 1.000
CAPITAL_AREA 0.553 0.497 0.000 0.000 1.000 1.000 1.000
AVSIZE 14.021 1.183 7.831 13.232 13.929 14.736 20.384
AVRISK 2.434 0.957 5.277 1.944 2.418 2.889 10.811
LEADERSHIP 0.243 0.429 0.000 0.000 0.000 0.000 1.000
LNEXP 2.393 0.737 0.000 1.946 2.565 2.944 3.584
Note: Panels A and B report univariate descriptive statistics at the auditor and auditor-year levels. See Appendix 1 for the variable
definitions.
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edical Publications Ltd, W
iley O
nline Library on [26/06/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on W
iley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License
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1254 CONTEMPORARY ACCOUNTING RESEARCH
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nloaded from
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/doi/10.1111/1911-3846.13035 by D
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 M
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e:
P
an
el
s
A
an
d
B
re
po
rt
un
iv
ar
ia
te
de
sc
ri
pt
iv
e
st
at
is
ti
cs
fo
r
w
om
en
an
d
m
en
at
th
e
au
di
to
r
an
d
au
di
to
r-
ye
ar
le
ve
ls
,r
es
pe
ct
iv
el
y.
T
he
ri
gh
tm
os
t
co
lu
m
n
re
po
rt
s
ch
i-
sq
ua
re
st
at
is
ti
cs
fr
om
K
ru
sk
al
–
W
al
lis
te
st
s.
Se
e
A
pp
en
di
x
1
fo
r
th
e
va
ri
ab
le
de
fi
ni
ti
on
s.
*,
**
,a
nd
**
*
re
pr
es
en
t
si
gn
if
ic
an
ce
le
ve
ls
of
10
%
,5
%
,a
nd
1%
,r
es
pe
ct
iv
el
y.
EXAM PERFORMANCE AND CAREER SUCCESS 1255
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nloaded from
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iley.com
/doi/10.1111/1911-3846.13035 by D
uodecim
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edical Publications Ltd, W
iley O
nline Library on [26/06/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on W
iley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License
gender differences exist, we augment the model with gender and interact it with exam scores.
We further explore the dynamics of career success through path analysis, revealing the underly-
ing mechanisms and highlighting how these processes differ between men and women.
5.1 | Regression results for the relation between exam scores and measures of
career success
Table 4 presents the results. It shows a positive association between CPA exam scores and most
of our career success variables for male auditors, but not for their female counterparts. For
instance, in Column 1, the positive coefficient estimate on EXAMSCORE for male CPAs
(0.058, p < 0.01) indicates a 6% increase ((e0.058  1)  1) in annual compensation (LNCOMP)
for a one-stanine improvement in exam scores. Conversely, for female CPAs, the impact on
compensation is substantially lower, at 1% ((e0.058–0.048  1)  100). Similarly, the results indi-
cate that exam scores are positively associated with promotion to partner, client portfolio size,
and leadership (PARTNER, LNPORTF, LEADERSHIP) for male auditors, but these associa-
tions are weaker or absent for female auditors. Regarding client portfolio characteristics and
average portfolio risk (AVRISK), which is an inverse measure of client risk, we find that for
male auditors who performed better on the CPA exam, the average bankruptcy risk of their
portfolios is higher (0.035, p < 0.01), but this inverse relation is moderated by FEMALE
(0.080, p < 0.01), such that this finding does not apply to female auditors. Average client size
(AVSIZE) is positively associated with exam scores for both male and female auditors, with no
F I GURE 2 Proportion (%) of Big 4 signing auditors (male and female) promoted to Big 4 audit partner, by CPA
exam score stanine, from 2003 to 2016. We calculate proportions at the auditor level because repeated observations at
the auditor-year level result in proportions that do not represent the underlying sample distribution.
1256 CONTEMPORARY ACCOUNTING RESEARCH
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iley.com
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edical Publications Ltd, W
iley O
nline Library on [26/06/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on W
iley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License
moderating effect. For the remaining two career outcomes, we find that working in the capital
area (CAPITAL_AREA) is positively associated with exam scores for both male and female
auditors, with no moderating effect, but industry specialization (IND_SPEC) is not associated
with exam scores for men and negatively associated for women.
Turning to the control variables, the coefficient on SWEDISH is positive and highly signifi-
cant in most regressions, indicating that a Swedish background is associated with career success
in auditing in our setting. LNEXP is significantly associated with the most dependent variables
in the expected direction, consistent with experience increasing career success. Conversely, can-
didates who require multiple attempts to pass the exam (RETAKE) are less successful in terms
of the most measures. In summary, Table 4 shows that the key variables representing career
success—compensation, promotion to Big 4 partner, portfolio size, and leadership role—are
positively associated with performance on the CPA exam for male auditors, but much less so or
not at all for female auditors.
Next, we investigate the mechanisms through which an auditor’s CPA exam scores can
influence auditor compensation. Audit partners plausibly earn more than non-partner signing
auditors, and Knechel et al. (2013) show that compensation increases with client portfolio size.
Therefore, the positive relation between CPA exam performance and compensation may be
transmitted through partner status and/or portfolio size, which are measures of career success.13
We use path analysis to model these potential indirect effects.
F I GURE 3 Average compensation of Big 4 male and female signing auditors, by CPA exam score stanine, from
2003 to 2016. Average compensation is shown in thousands of euros.
13In our robustness checks, we test whether the other measures of career success also act as mediators that have an indirect effect on the
relation between EXAMSCORE and compensation.
EXAM PERFORMANCE AND CAREER SUCCESS 1257
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nloaded from
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iley.com
/doi/10.1111/1911-3846.13035 by D
uodecim
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edical Publications Ltd, W
iley O
nline Library on [26/06/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on W
iley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License
T
A
B
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s
ta
bl
e
re
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s
re
su
lt
s
fr
om
es
ti
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at
in
g
po
ol
ed
or
di
na
ry
le
as
t
sq
ua
re
s
or
lo
gi
st
ic
re
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es
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on
s
of
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di
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ns
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r
ou
tc
om
es
on
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an
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nt
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ia
bl
es
.T
he
es
ti
m
at
io
ns
in
cl
ud
e
fi
sc
al
-y
ea
r
an
d
ex
am
-y
ea
r
fi
xe
d
ef
fe
ct
s.
T
he
co
ef
fi
ci
en
t
es
ti
m
at
es
ar
e
lis
te
d
in
th
e
fi
rs
t
ro
w
of
ea
ch
ce
ll,
w
it
h
t-
va
lu
es
or
z-
va
lu
es
re
po
rt
ed
in
pa
re
nt
he
se
s.
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e
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pp
en
di
x
1
fo
r
th
e
va
ri
ab
le
de
fi
ni
ti
on
s.
W
e
ad
ju
st
st
an
da
rd
er
ro
rs
fo
r
he
te
ro
sk
ed
as
ti
ci
ty
an
d
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us
te
r
at
th
e
au
di
to
r
le
ve
l(
P
et
er
se
n,
20
08
).
*,
**
,a
nd
**
*
re
pr
es
en
t
si
gn
if
ic
an
ce
le
ve
ls
of
10
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%
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nd
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ct
iv
el
y,
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se
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on
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o-
ta
ile
d
te
st
s.
1258 CONTEMPORARY ACCOUNTING RESEARCH
 19113846, 2025, 2, D
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nloaded from
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iley.com
/doi/10.1111/1911-3846.13035 by D
uodecim
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edical Publications Ltd, W
iley O
nline Library on [26/06/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on W
iley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License
5.2 | Path analysis
Table 5 and Figure 4 present the results from our path analysis. Panel A of Table 5 and
Figure 4 report the regression coefficients for each path. As Figure 4 shows, in addition to the
direct effect of EXAMSCORE on compensation (LNCOMP), there are indirect effects trans-
mitted through the mediating variables promotion to a partner (PARTNER) and client portfo-
lio size (LNPORTF). We compute the indirect effects by multiplying the coefficients on the
paths from the exam score to the mediator by the coefficients from the mediator to compensa-
tion. All paths are moderated by the gender indicator variable (FEMALE). Panel B reports the
indirect, direct, and total effects of EXAMSCORE on compensation for male and female audi-
tors separately.
Consistent with H1, the results from our path analysis show positive associations between
exam scores and career success (LNCOMP, PARTNER, LNPORTF) for male auditors, as indi-
cated by the significance of their coefficients (c01 = 0.040, a1 = 0.069, and a2 = 0.133) reported
in Figure 4 and Table 5, Panel A. FEMALE (c03 = 0.028, a13 = 0.116, and a23 = 0.097)
moderates these paths, weakening the positive associations between exam scores and career suc-
cess for female auditors, consistent with H2. For instance, results for LNCOMP in Panel A
show path c01 from EXAMSCORE to LNCOMP (0.040), which is moderated by gender
(c03 = 0.028, p < 0.00), meaning that the direct relation between CPA exam score
(EXAMSCORE) and compensation for female auditors is smaller than that for their male coun-
terparts (c01 + c03 = 0.011, p < 0.05). In terms of economic significance, the direct effect for a
male auditor indicates that given mean compensation of €129,000, male auditors’ compensation
increases by €5,289 ((e0.040  1)  100 = 4.1%) for each stanine of improvement in exam score.
The direct effect for a female auditor indicates that given mean compensation of €91,000,
female auditors’ compensation increases by only €1,000 ((e0.011  1)  100 = 1.1%) for each
stanine of improvement in exam score.
Figure 4 illustrates three indirect effects of CPA exam scores on compensation: one through
the path from PARTNER to LNCOMP, another through LNPORTF to LNCOMP, and a
third through both PARTNER and LNPORTF to LNCOMP. First, by examining the paths
from PARTNER to LNCOMP and from LNPORTF to LNCOMP, we can infer how the effect
of EXAMSCORE on compensation is mediated by these two factors. Figure 4 and Table 5,
Panel A, indicate that the path from PARTNER to LNCOMP has a positive coefficient
(b1 = 0.492, p < 0.00). For male auditors, the indirect effect of EXAMSCORE on compensa-
tion (LNCOMP) through promotion to partner (PARTNER) is the product of the coefficients
on the paths from EXAMSCORE to PARTNER and from PARTNER to COMPENSATION
(a1b1 = 0.035, p < 0.01). Regarding the indirect effect through client portfolio size, Figure 4
and Panel A show that the coefficient on the path from EXAMSCORE to LNPORTF (a2) is
0.133 (p < 0.00), and the coefficient on the path from LNPORTF to LNCOMP (b2) is 0.081
(p < 0.00). Thus, the indirect effect of EXAMSCORE on compensation through portfolio size
(LNPORTF) is a2 multiplied by b2, equaling 0.010 (p < 0.00).
In addition to the two indirect effects, there is a serial mediation effect (Hayes, 2018) of
exam score mediated first by partner promotion (EXAMSCORE! PARTNER), then partner
promotion influencing portfolio size (PARTNER! LNPORTF), and finally portfolio size con-
tributing to compensation (LNPORTF! LNCOMP). Multiplying the coefficients of these
paths (a1d21b2) yields 0.008 (= 0.069  1.417  0.081, p < 0.00). Combining these three path-
ways yields the total indirect effect of EXAMSCORE on LNCOMP. Table 5, Panel B, shows
that for male auditors, this total indirect effect is positive and significant (0.053, p < 0.00). Panel
B also reports the direct effect (c01 = 0.040, p < 0.00) and the total effect (0.093, p < 0.00) for
male auditors. The economic significance of the total effect for male partners, whose mean com-
pensation is €187,700, is that total compensation increases by €18,208 ((e0.093  1) 
100 = 9.7%) for each CPA exam score stanine.
EXAM PERFORMANCE AND CAREER SUCCESS 1259
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ow
nloaded from
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iley.com
/doi/10.1111/1911-3846.13035 by D
uodecim
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edical Publications Ltd, W
iley O
nline Library on [26/06/2025]. See the Terms and Conditions (https://onlinelibrary.wiley.com/terms-and-conditions) on W
iley Online Library for rules of use; OA articles are governed by the applicable Creative Commons License
T
A
B
L
E
5
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od
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ed
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As Table 5, Panel A, reports, these relations differ for female auditors. Regarding the indi-
rect effects, we do not observe any significant relations between exam scores and compensation.
Moreover, our moderated mediation analysis reveals that the path from PARTNER to
LNPORTF is moderated by FEMALE. The coefficient on the interaction of FEMALE and
PARTNER is positive and significant (d3 = 0.486, p < 0.00), which means that being a female
partner is associated with a greater increase in portfolio size than being a male partner. How-
ever, female audit partners receive significantly lower overall compensation because for
LNCOMP, the coefficient on the interaction of PARTNER  FEMALE is negative and signifi-
cant (b13 = 0.067, p < 0.05). Furthermore, as shown by the insignificant coefficient on the
interaction between FEMALE and LNPORTF in the LNCOMP regression (b23 = 0.002,
p = 0.71), the extent to which larger portfolios are associated with an increase in compensation
for female audit partners is not significantly different from that of their male counterparts.
Panel B reports indirect effects for female auditors. The results confirm that being a partner
or having a large portfolio does not mediate the effect of EXAMSCORE on LNCOMP for
female auditors. Moreover, although we observe a small positive direct effect of EXAMSCORE
on LNCOMP (0.011, p < 0.05),14 the total effect, which combines the direct effect and indirect
effects, is not significant. Combined, we conclude that EXAMSCORE has no significant influ-
ence on compensation for female auditors.
In summary, although better CPA exam scores correlate with career success in auditing,
this relation is markedly different between genders. For men, exam scores have an influence
on compensation both directly and indirectly, via promotion and portfolio size. For female
auditors, the effects are either not significant or substantially weaker than those for male
auditors.
F I GURE 4 Path analysis of EXAMSCORE and career success measures for male and female auditors. We adjust
standard errors for heteroskedasticity and cluster at the auditor level (Petersen, 2008). We include SWEDISH, RETAKE,
LNEXP, and fiscal-year and exam-year fixed effects in all the models. See Appendix 1 for the variable definitions.
*, **, and *** represent significance levels of 10%, 5%, and 1%, respectively, based on two-tailed tests.
140.040  0.028 = 0.12, with a small difference resulting from rounding.
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5.3 | Robustness checks
We further examine the sensitivity of the data by performing tests using entropy balancing. We
then examine the effects of university education, address potential survivorship bias, and con-
sider alternative mediators and mediating relations.
5.3.1 | Entropy balancing
We apply entropy balancing to achieve better covariate balance (Hainmuller, 2012). We include
auditor-specific control variables (SWEDISH, RETAKE, and LNEXP) in the entropy-
balancing procedure. We specify three balance constraints for the covariates (i.e., the mean,
variance, and skewness). The inferences from untabulated results for the entropy-balanced sam-
ples are consistent with those from our main tests.
5.3.2 | University education
To alleviate concerns that differences in quality among university programs drive higher scores
and impact partner promotion and compensation, we use self-reported data from LinkedIn to
add university fixed effects to our regressions. Untabulated results indicate that after controlling
for the university from which the auditor graduated, our main inferences hold.
5.3.3 | Survivorship bias
Our sample is restricted to auditors who passed the CPA exam and subsequently sign audit
reports for the Big 4 accounting firms. This includes those who left public accounting prior to
becoming partners. However, to address potential survivorship bias, we reanalyze the subgroup
of auditors who worked (or continued to work) as auditors for at least 7 years (which is the
average number of years to partner promotion). The untabulated results are consistent with our
main findings.
5.3.4 | Alternative mediators
Because prior studies suggest that auditors who are industry specialists provide higher-quality
audits (Hardies, Hossain, et al., 2021) and responsibility for listed company audits indicates
leadership within the firm (Dong, 2022), we test whether industry specialization and/or leader-
ship mediate the relation between EXAMSCORE and compensation. We test this by con-
ducting a path analysis like that shown in Figure 1, but replacing LNPORTF with IND_SPEC
and then with LEADERSHIP. The untabulated results indicate that auditing listed clients is a
positive and significant mediator in the relation between EXAMSCORE and compensation.
However, as in our main test, this relation holds only for male auditors.15 In contrast, we find
no significant indirect effects through industry specialization. In both alternative path analyses,
the direct effects of EXAMSCORE on compensation are positive and significant for both men
and women, but are significantly larger for men.
15We also investigate other indicator variables for an auditor’s leadership role, namely, being chief executive officer or a board member
of an accounting firm. However, there are almost no females in these positions and we do not find significant results.
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5.3.5 | Alternative mediating relations
In another untabulated test, we include all our outcome variables other than compensation
(i.e., partner, portfolio size, industry specialization, capital area, client size, client riskiness, and
leadership) simultaneously as mediators in the relation between EXAMSCORE and compensa-
tion. Again, we find that EXAMSCORE has a direct positive effect on compensation and that
the effect is significantly larger for male auditors (0.033, p < 0.01) than for female auditors
(0.011, p < 0.05). In addition, there is a positive indirect effect through PARTNER,
LNPORTF, CAPITAL_AREA, AVSIZE, and LEADERSHIP for male auditors, but only one
positive indirect effect for female auditors (through CAPITAL_AREA).
5.4 | Additional analyses
We report several additional analyses to expand our understanding of the relations between
exam scores and career outcomes, and to assess the sensitivity of our findings. These analyses
include comparing Big 4 and non–Big 4 auditors, adding auditors who have left the profession,
and controlling for audit quality.
5.4.1 | Non–Big 4 auditors compared to Big 4 auditors
Although our tests focus on Big 4 auditors, in untabulated tests, we also examine data for
non–Big 4 auditors who have passed the exam and compare them with Big 4 auditors. We
find that non–Big 4 auditors have lower compensation, lower exam scores, and smaller client
portfolios than Big 4 auditors. Regression results show similar overall patterns, but fewer
results are significant, and coefficients are smaller than those for the Big 4 auditors. Higher
exam scores are associated with higher compensation for men working for non–Big
4 accounting firms but not for women. An untabulated path analysis including data for Big
4 and non–Big 4 auditors, and using BIG4 as a mediator variable instead of PARTNER,
shows that auditors with higher exam scores are more likely to be employed by a Big
4 accounting firm. However, we find no gender interaction effect between EXAMSCORE
and working for the Big 4. Our path analysis results also show that for the sample that
includes both Big 4 and non–Big 4 auditors, working for the Big 4 determines some of the
effect of EXAMSCORE on auditor compensation.
5.4.2 | Auditors who have left the profession
We investigate whether leaving the auditing profession is a more successful career path for
those who pass the CPA exam. Specifically, we test whether Big 4 auditors who no longer
sign audit reports (excluding those older than 65 years because their leaving the profession
is likely to be due to retirement) earn higher compensation. In untabulated correlations, we
find that compensation for Big 4 auditors who leave the profession was higher before they
exited than after they exited. Moreover, untabulated regression results show that exiting the
profession is associated with lower income. In addition, the reduction in income after leav-
ing is somewhat smaller for female auditors. Subsample analyses show that income
decreases after leaving the auditing profession for both partners and non-partners. This
decline is seen in male auditors across all measures of compensation and in female auditors
when looking at the untransformed compensation value (COMP), but not when considering
its logarithmic form (LNCOMP).
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5.4.3 | Audit quality
Because the objective of the CPA exam is to ensure that auditors are competent in performing
their duties (AICPA, 2018; IAESB, 2019), we test whether CPA exam scores are positively asso-
ciated with audit quality, as proxied for using discretionary accruals and going-concern opin-
ions. We find no consistent evidence that audit quality increases with exam scores for male or
female auditors. There are several possible explanations for this lack of association. For exam-
ple, it may be that (1) minimum thresholds for certification are sufficient to ensure a reasonable
level of audit quality, (2) firms’ quality control processes remove much of the variation in indi-
vidual partners’ accounting or auditing practices, or (3) greater exam performance does not lead
to more conservative applications of GAAP or assessments of clients’ abilities to continue as
going concerns. Furthermore, the proxies available for audit quality may contain too much
measurement error to detect any effect.
6 | CONCLUSION
This study investigates the intriguing question of whether performance on CPA exams corre-
lates with the career success of auditors. Our findings show a strong connection between the
two, albeit with an interesting difference based on gender. Specifically, we find a consistent rela-
tion between higher CPA exam scores and career success, but this connection is significant only
among male auditors. Our research shows that men who excel on the CPA exam tend to earn
higher compensation. Furthermore, they enjoy a higher likelihood of promotion to partner
positions within the Big 4 accounting firms and of managing larger client portfolios.
Our study makes a significant contribution by assessing the extent to which professional
exams serve as indicators of subsequent career success. By leveraging a unique data set
encompassing individual CPAs’ exam results and career outcomes, including compensation
levels, promotions to partner roles, and client portfolio sizes, we document the correlation
between strong exam performance and career success. This correlation manifests in the form of
enhanced compensation, larger client portfolios, and an increased chance of working for a
Big 4 firm and becoming a Big 4 partner. In addition, we find that the most attractive job
opportunities in terms of compensation for certified auditors are in Big 4 accounting firms
because we observe that auditors who leave Big 4 accounting firms tend to earn lower income
at non–Big 4 accounting firms or elsewhere. This observation holds regardless of gender or
CPA exam performance.
Our results also contribute by revealing differences between genders. Women face greater
challenges in securing partner roles within the Big 4 accounting firms. Furthermore, the correla-
tion between higher CPA exam scores and increased compensation is markedly more pro-
nounced for male auditors than for female auditors. Our results indicate that differences in
CPA exam performance cannot explain disparities in career outcomes between women and
men. Instead, other factors, which may include gender discrimination, appear to be at play.
Although this article expands our understanding of the relations between CPA exam scores
and future career performance, we acknowledge certain limitations. For example, our single-
country setting may limit generalizability. In addition, we do not control for personal or family
factors that may influence career aspirations or accomplishments, such as women preferring
more flexible work or being more likely to leave the profession. Moreover, although our tests
using auditors who left the profession show that they do not earn higher compensation, auditors
with high exam scores might have left the profession for careers that are desirable in other ways.
Finally, due to data limitations, we do not control for the impacts of continuing education,
adherence to ethical standards and professional codes of conduct, or client satisfaction on audi-
tor compensation.
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Our study sets the stage for an intriguing debate on the significance of auditor CPA exam
scores versus alternative unmeasured factors, such as soft skills or social capital, in shaping
career performance. We find that in our sample, exam scores are positively associated with our
measures of career success. However, the results also raise questions about the recognition of
ability, particularly in the case of female auditors, for whom exam scores do not appear to
translate into career success.
ACKNOWLEDGMENTS
We are grateful to two anonymous reviewers and Linda Myers (editor) for insightful comments
that have greatly improved this article. We also thank Tzu-Ting Chiu, Frøystein Gjesdal, Claire
Grayston, Kyrre Kjellevold, Roger Simnett, and workshop participants at Aalto University,
University of Auckland, Universitas Diponegoro, Lincoln University (New Zealand), NHH
Norwegian School of Economics, University of Turku, and Victoria University of Wellington,
and participants at the 16th Australian National Centre for Audit & Assurance Research
(ANCAAR) Audit Research Forum for many useful comments. We acknowledge the Auditing
Board and executives of the Central Chamber of Commerce and the Auditing Oversight Unit
of the Finnish Patent and Registration Office and its officers for providing the requisite data.
We appreciate the invaluable help of Mervi Niskanen, Jukka Karjalainen’s head of department,
in arranging for us to have access to essential data and finding the appropriate files. Without
her generous efforts we would not have been able to complete this article. We thank the HSE
Support Foundation for financial support. On behalf of the late Jukka Karjalainen, we grate-
fully acknowledge financial support from the OP-Pohjola Group Research Foundation. All
remaining errors are our own. Open access publishing facilitated by Aalto-yliopisto, as part of
the Wiley - FinELib agreement.
DATA AVAILABILITY STATEMENT
Data sources are described in the article. Requests for data may be directed to the administra-
tors of the databases.
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APPENDIX 1: VARIABLE DEFINITIONS
Variable Definition
AVRISK Mean bankruptcy risk, measured by the estimated Altman (1983, 2013) z-score for a private
firm, of the firms audited by auditor a in year t
AVSIZE Mean total assets (in the natural logarithm form) of the firms audited by auditor a in year t
BIG4 Indicator variable equal to one if auditor a works in Big 4 audit firm in year t, and zero
otherwise
CAPITAL_AREA Indicator variable equal to one if auditor a works primarily in the Helsinki capital area, and
zero otherwise. In addition to the city of Helsinki, the capital area consists of the neighboring
cities of Vantaa, Espoo, Kauniainen, Klaukkala, Tuusula, Kerava, Järvenpää, and Sipoo
EXAMSCORE Standardized score from the professional exam that candidates must pass to become an
authorized auditor, for auditor a. We use stanines to standardize scores on a 9-point scale with
a mean of 5 and a standard deviation of 2. We calculate the score stanines for each year
separately
FEMALE Indicator variable equal to one if auditor a is female, and zero otherwise
IND_SPEC Indicator variable equal to one if auditor a audited total assets for industry k in fiscal year t
belonging to the upper quartile of its distribution, and zero otherwise
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APPENDIX 2: CPA EXAMS AND CAREERS FOR PROFESSIONAL AUDITORS IN
FINLAND
Finland has more than one type of licensed auditor, like many European countries
(Margarison & Moizer, 1996). Our study focuses on first-tier KHT auditors who are licensed to
audit any kind of business or organization, including listed companies.16 In this study, we use
the terms “CPA” and “auditor” interchangeably, both of which refer to a licensed first-tier
KHT auditor.
To pass the exam, a candidate must receive approximately half of the available points for
each part. Most candidates do not pass the exam, but candidates may retake the exam as many
times as they wish. Those who do not pass the exam after taking it a few times usually leave the
auditing profession. After a candidate passes the exam, they are allowed to sign audit reports
independently. We use the term “signing auditor” to describe these auditors. Because CPA certi-
fication is needed only for auditing practice, there are many other opportunities for those
possessing a master’s degree in accounting and a few years of practical training and work expe-
rience in an accounting firm.
The exam is conducted once a year. It consists of two parts, with one full day allowed to
complete each part. The first part includes shorter questions, and the second part contains a
company’s financial statements. In the second part, the candidate’s task is to audit the financial
statements and provide the auditor’s opinion. The topics included in the exam are accounting
and financial statement regulations, auditing regulations, and generally accepted audit prac-
tices. Furthermore, the candidate must have a command of regulations related to internal con-
trols, risk management, and corporate forms.
Over the years, the pool of candidates has changed in terms of age, gender, and ethnicity.
Before the beginning of this century, candidates were usually 35–40 years old, whereas at the
beginning of this century, typical candidates were approximately 30 years old
(Horsmanheimo & Tuominen, 2005). In 2000, the Ordinance of the Ministry of Trade and
Industry 350/2000 reduced the minimum required audit experience from 5 to 3 years, most
APPEND I X 1 (Continued)
Variable Definition
LEADERSHIP Indicator variable equal to one if auditor a audited at least one listed client in year t, and zero
otherwise
LNCOMP Natural logarithm of auditor a’s total earned income (in euros) in year t
LNEXP Natural logarithm of one plus the number of years since auditor a became a certified auditor in
year t
LNPORTF Natural logarithm of the sum of the total assets (in euros) of the firms audited by auditor a in
year t
PARTNER Indicator variable equal to one if auditor a is an audit partner in a Big 4 accounting firm in year
t, and zero otherwise
RETAKE Indicator variable equal to one if auditor a required more than one attempt to pass the CPA
exam, and zero otherwise
SWEDISH Indicator variable equal to one if auditor a belongs to the Swedish-speaking minority, and zero
otherwise
16The other two types are HTM and JHTT auditors. They are authorized to audit small- and medium-sized private firms, and
companies in the public sector owned by municipalities, respectively. Each type of auditor takes different exams and is subject to
different criteria to be eligible to take the exam.
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likely contributing to this trend. Another trend is that the number of women increased steadily
over time, with females comprising approximately half of the candidates at the end of our sam-
ple period.
The majority of those who take the CPA exam work for the Big 4 accounting firms. This
may be because of Finland’s audit market structure. Virtually all publicly listed firms and most
large private companies are audited by Big 4 accounting firms. For example, in 2015, of the
total fees from public interest entity clients, 99% were charged by the Big 4 accounting firms,
with PwC at 46%, KPMG at 26%, EY at 20%, and Deloitte at 7% (Finnish Patent and Regis-
tration Office, 2015).
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