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Underwriters play a pivotal role in the IPO process. Information entropy, a tool for measuring the uncertainty and complexity of information, has been widely applied to various issues in complex networks. Information entropy can quantify the uncertainty and complexity of nodes in the network, providing a unique analytical perspective and methodological support for this study. This paper employs a bipartite network analysis method to construct the relationship network between underwriters and accounting firms, using the centrality of underwriters in the network as a measure of their influence to explore the impact of underwriters' influence on the distribution of interests and audit outcomes. The findings indicate that a more pronounced influence of underwriters significantly increases the ratio of underwriting fees to audit fees. Higher influence often accompanies an increase in abnormal underwriting fees. Further research reveals that companies underwritten by more influential underwriters experience a decline in audit quality. Finally, the study reveals that a well-structured audit committee governance and the rationalization of market sentiments can mitigate the negative impacts of underwriters' influence. The innovation of this paper is that it enriches the content related to underwriters by constructing the relationship network between underwriters and accounting firms for the first time using a bipartite network through the lens of information entropy. This conclusion provides new directions for thinking about the motives and possibilities behind financial institutions' cooperation, offering insights for market regulation and policy formulation. [ABSTRACT FROM AUTHOR]

Using panel data for Chinese listed firms from 2009 to 2015, this research examines the impact of the green credit policy on the audit fees of heavily polluting firms by adopting a difference-in-difference (DID) model. The results show that the green credit policy increases the audit fees of heavily polluting firms, suggesting that auditors can perceive the risks imposed by the green credit policy on heavily polluting firms. Mechanism tests reveal that the implementation of the green credit policy increases audit fees by increasing the financing cost and reducing the loan maturity. Further research shows that the positive effect is more significant in regions with stronger regulatory environments and higher trust, and among firms without political connections and audited by the top-ten domestic audit firms. The Chinese government should actively encourage third-party financial institutions to participate in firms' environmental governance. [ABSTRACT FROM AUTHOR]

Purpose: This study aims to examine whether firms that appear to exhibit high sustainable outputs are more likely to pay higher audit fees than firms without such outputs. Design/methodology/approach: The sustainability outputs are measured using a sustainable product portfolio consisting of four products: clean energy products, eco-design products (EDP), environmental products (EP) and sustainable building projects (SBP). The audit fee variable is measured by the natural logarithm of the total amount of audit fees. The study tests two models of the association between these outputs and audit fees; Model 1 tests this association in the absence of the moderating variable (sustainability committee), and Model 2 tests the association in the presence of the moderating variable. Findings: An analysis of data on 261 European firms from the Refinitiv Eikon database from 2010 to 2019 shows that high sustainability outputs are significantly and positively associated with audit fees. More importantly, this association is moderated by the presence of a board-level sustainability committee, suggesting that this type of committee reflects a factor considered by auditors in their audit risk assessment practices. The findings indicate that in Model 1, one (EP) out of four variables has a significant and positive association with audit fees, while in Model 2 and in the presence of sustainability committee, two variables (EP and EDP) have a significant and negative association with audit fees. However, the robust analysis shows that three variables (EP, EDP and SBP) have significant and negative associations with audit fees. Practical implications: The study findings have important implications for policymakers, auditors and firms' managers. For policymakers, the findings provide support for the argument that sustainable attitudes incentivise firms to manage sustainable product profiles more effectively. As such, policymakers should incentivise firms to establish a sustainability committee and regulate its role and responsibilities. Auditors should coordinate with the sustainability committee to facilitate audit efforts and reduce audit fees. Social implications: Understanding the relationship between sustainable products and audit fees will allow firms to improve their portfolio of sustainable products. In addition, other social implications of this study relate to improving relationships with society by establishing a sustainability committee that is responsible to communicate with that society. Originality/value: The results support the argument that firms should manage sustainable product portfolios more effectively. In addition, the results of the study highlight the importance of a new variable as a moderator, the sustainability committee, which has not been examined before. [ABSTRACT FROM AUTHOR]

Using the green finance policies (GFPs) in China as a shock to capital allocation, we find that the implementation of GFPs improves audit quality for green firms. Specifically, green firms are likely to receive favorable audit opinions, pay lower audit fees, and generate higher-quality financial reports after the implementation of GFPs. When examining the mechanisms through which GFPs affect audit risk for green firms, we find that green firms are likely to experience lower financial risks and have access to more bank loans at a lower cost after the implementation of GFPs. Further analysis shows that the main results are more pronounced when GFPs are better enforced, where auditors face more government intervention, and where firms are financially constrained. Overall, we document that GFPs decrease financial risk for green firms and have a positive spillover to auditors by mitigating audit risk. [ABSTRACT FROM AUTHOR]

SUMMARY: This study investigates whether audit clients' blockchain activities (including crypto-related activities) affect audit risk by examining the association between blockchain disclosures in 10-K filings and audit fees. Focusing on U.S. firms between 2013 and 2020, we empirically show that audit fees are higher for companies disclosing blockchain activities in 10-K filings. We further find that this positive association is more pronounced for companies disclosing current blockchain implementation than for companies with plans for blockchain activities. The results indicate that clients' blockchain activities influence audit risk as assessed by external auditors. As blockchain technology and its applications are emerging, our findings have implications that should be considered by auditors, regulators, and top management. [ABSTRACT FROM AUTHOR]

This paper investigates a firm's stock return asynchronicity through the auditor's perspective to distinguish whether this asynchronicity can proxy for the company's firm‐specific information or the quality of its information environment. We find a significant and positive association between asynchronicity and audit fees after controlling for auditor quality and other factors that affect audit fees, suggesting that stock return asynchronicity is more likely to capture a company's firm‐specific information than its information environment. We also find that asynchronous firms are more likely to receive adverse opinions on their internal controls over financial reporting, but are associated with lower costs of capital and auditor litigation, providing further evidence in support of the firm‐specific information argument. Asynchronicity's positive association with audit fees is driven by firms with higher accounting reporting complexity, suggesting stock return asynchronicity captures a firm's complexity, resulting in more significant efforts by the auditor. [ABSTRACT FROM AUTHOR]

We hypothesize that the demand for auditing in the registered investment management industry arises from the auditor's ability to act as a solvent indemnifier when outside parties incur losses because of financial misrepresentations. Consistent with this insurance demand, we find that, relative to financial companies, registered investment companies are more likely to retain Big 4 auditors. Restricting the sample to the registered investment management industry, we construct three direct tests of the insurance demand hypothesis. We find that (a) the market share of a Big 4 firm is positively associated with the firm's wealth, (b) changes in audit fees are positively associated with changes in the audit firms' wealth, and (c) net fund flows increase when clients switch from non‐Big 4 to Big 4 auditors. Our results highlight an unusually high demand for Big 4 auditors in the registered investment industry, which we attribute to the insurance demand for auditing services. [ABSTRACT FROM AUTHOR]

We examine the relation between institutional investors' horizons and bank transparency. The novelty of this research is to consider three important aspects of transparency: disclosure quality, private information gathering and auditor fees. We find strong evidence indicating that banks dominated by long‐term (short‐term [ST]) institutional shareholders exhibit higher (lower) levels of disclosure quality. However, there is no evidence that investor horizon has a differential effect on private information gathering and audit pricing. The study employs alternative proxies and estimations such as two‐stage least squares and propensity score matching to address endogeneity. We also document that banks with higher ST institutional shareholding are associated with lower crash risk. These findings are particularly significant because poor bank transparency has been identified as a contributing factor to the 2007–2009 financial crisis. [ABSTRACT FROM AUTHOR]

Purpose: This study investigates the relationship between companies with military directors and audit fees in Indonesia. Design/methodology/approach: Using upper echelon and audit pricing theories, the authors examine military directors' roles in the demand for and supply of auditing services. The authors use Indonesia as their research setting as their military forces have a long history of involvement in business. The study sample includes 898 firm-year observations on the Indonesia Stock Exchange during 2014–2018. Findings: The authors find a negative relationship between military connections and audit fees. This is consistent with auditors assessing lower audit risk and charging lower audit fees to companies that have leaders with military experience. The study findings are strongest where there is military experience on the board of directors and where the military experience is from the Army. Originality/value: This study extends the literature on the benefits of military experience in company leadership, especially in the context of auditing research. The study findings also have implications for the selection of board candidates and auditor risk assessments. [ABSTRACT FROM AUTHOR]

Objectives: The study aims to examine the connection between audit quality and earnings management practices in listed non-financial firms in Nigeria. Prior work: The study extends discussion on earnings management and audit quality nexus by exploring the concept of real earnings Mohammed Kayodemanagement vis-à-vis the metrics of audit quality. Approach: A purposive nonprobability sampling procedure was employed to choose a sample of 30 quoted companies on the Nigerian Exchange Group (NGX). Data was retrieved from the audited financial report of the selected companies for ten years (2012-2021) and hypotheses were tested using the random effect regression model. Results: The results showed that the audit quality metrics used (audit fee, specialization of the auditor, auditor's tenure, and audit firm size) could not apprise any significant change in the actual earnings management practice of the sampled firms. Implications: Future researchers should consider different factors and proxies to measure audit quality, which may have significant effects on actual earnings management in Nigeria. Value: The study upsets the preponderant notion of audit quality having declining effect on earnings management and in uncovering real earnings management, size, quantum of audit fees paid, length of auditor-client relationship and engagement of industry-specialized auditor offer no robust influence. [ABSTRACT FROM AUTHOR]

Purpose: The current study uses an advanced machine learning method and aims to investigate whether auditors perceive financial statements that are principles-based as less risky. More specifically, this study aims to explore the association between principles-based accounting standards and audit pricing and between principles-based accounting standards and the likelihood of receiving a going concern opinion. Design/methodology/approach: The study uses an advanced machine-learning method to understand the role of principles-based accounting standards in predicting audit fees and going concern opinion. The study also uses multiple regression models defining audit fees and the probability of receiving going concern opinion. The analyses are complemented by additional tests such as economic significance, firm fixed effects, propensity score matching, entropy balancing, change analysis, yearly regression results and controlling for managerial risk-taking incentives and governance variables. Findings: The paper provides empirical evidence that auditors charge less audit fees to clients whose financial statements are more principles-based. The finding suggests that auditors perceive financial statements that are principles-based less risky. The study also provides evidence that the probability of receiving a going-concern opinion reduces as firms rely more on principles-based standards. The finding further suggests that auditors discount the financial numbers supplied by the managers using rules-based standards. The study also reveals that the degree of reliance by a US firm on principles-based accounting standards has a negative impact on accounting conservatism, the risk of financial statement misstatement, accruals and the difficulty in predicting future earnings. This suggests potential mechanisms through which principles-based accounting standards influence auditors' risk assessments. Research limitations/implications: The authors recognize the limitation of this study regarding the sample period. Prior studies compare rules vs principles-based standards by focusing on the differences between US generally accepted accounting principles (GAAP) and international financial reporting standards (IFRS) or pre- and post-IFRS adoption, which raises questions about differences in cross-country settings and institutional environment and other confounding factors such as transition costs. This study addresses these issues by comparing rules vs principles-based standards within the US GAAP setting. However, this limits the sample period to the year 2006 because the measure of the relative extent to which a US firm is reliant upon principles-based standards is available until 2006. Practical implications: The study has major public policy suggestions as it responds to the call by Jay Clayton and Mary Jo White, the former Chairs of the US Securities and Exchange Commission (SEC), to pursue high-quality, globally accepted accounting standards to ensure that investors continue to receive clear and reliable financial information globally. The study also recognizes the notable public policy implications, particularly in light of the current Chair of the International Accounting Standards Board (IASB) Andreas Barckow's recent public statement, which emphasizes the importance of principles-based standards and their ability to address sustainability concerns, including emerging risks such as climate change. Originality/value: The study has major public policy suggestions because it demonstrates the value of principles-based standards. The study responds to the call by Jay Clayton and Mary Jo White, the former Chairs of the US SEC, to pursue high-quality, globally accepted accounting standards to ensure that investors continue to receive clear and reliable financial information as business transactions and investor needs continue to evolve globally. The study also recognizes the notable public policy implications, particularly in light of the current Chair of the IASB Andreas Barckow's recent public statement, which emphasizes the importance of principles-based standards and their ability to address sustainability concerns, including emerging risks like climate change. The study fills the gap in the literature that auditors perceive principles-based financial statements as less risky and further expands the literature by providing empirical evidence that the likelihood of receiving a going concern opinion is increasing in the degree of rules-based standards. [ABSTRACT FROM AUTHOR]

Purpose: This study aims to investigate the association between executives with foreign backgrounds and the audit fees paid by the Chinese-listed firms over the period from 2010 to 2020. Design/methodology/approach: To examine the association between executives' foreign experience and audit fees, this study constructs the following empirical model: Lnfeei,t = β0 + β1Foreign backgroundi,t + ∑βj Controli,t + YearFE + IndFE + εi,t (1). Findings: This study finds that auditors charge higher fees for firms hiring more executives with foreign backgrounds. The results are robust to a battery of robustness checks, including fixed effects, alternative measures of independent variable, controlling for other characteristics of executives and auditors and entropy balancing method. Originality/value: This study sheds light on how executives' foreign backgrounds affect audit fees, enriching the literature on executive heterogeneity and audit fees and providing important implications for audit practitioners. [ABSTRACT FROM AUTHOR]

This paper addresses the effects of clients' carbon risk on audit pricing. Using data from 438 EU companies for the period 2013–2019, we find a positive relationship between carbon risk (measured by the level of carbon emissions) and audit fees. Furthermore, we find that participation in the European Union's Emission Trading System, a limited market and regulation scheme to mitigate special industries' Greenhouse Gas emissions, strengthens the positive relationship between carbon risk and audit fees. Insights from additional tests indicate that auditors price carbon risk particularly for large clients that are under greater public scrutiny and that the increase in fees rather stems from a risk premium charged by the auditor than higher audit effort. With interest in climate change developing rapidly across society, practice and research combined with the increasing importance of reducing carbon risk, our findings are timely and should thus appeal to a wide variety of recipients. [ABSTRACT FROM AUTHOR]

The aim of this research is to examine the impact of going concern audit opinion, financial distress, company complexity, institutional ownership, and company size on auditor switching. And in this research we also added a moderating variable, namely audit fees, to test the role of audit fees in moderating the relationship between factors that influence auditor switching. This research focuses on bank companies listed on the Indonesia Stock Exchange in 2019-2022. The data collection technique uses a purposive sampling method with a total of 164 data, taken from 41 banks listed on the Indonesia Stock Exchange. This research uses multiple linear regression analysis techniques and interaction tests or MRA (Moderated Regression Analysis). This calculation analysis was carried out with the help of SPSS software. The research results show that going concern audit opinion has a positive effect on auditor switching, while company complexity has a negative effect on auditor switching. However, factors such as financial distress, institutional ownership and company size have no influence on auditor change. Apart from that, the size of the audit fee does not moderate the relationship between the factors that influence a company's decision to change auditors. [ABSTRACT FROM AUTHOR]

The article is an editor's note from the NTU Management Review. It begins by expressing gratitude to the T. N. Soong Foundation for their support of research efforts in accounting, auditing, finance, taxation, ESG, and accounting information management in Taiwan. The note also highlights recent conferences and upcoming events, including a joint conference with Peking University and the "2024 Frontiers in Accounting and Finance International Conference." The article introduces two new area editors and provides brief summaries of the articles published in this edition, which cover topics such as valuation of options, D&O insurance coverage, in-house provision of corporate services, environmental information disclosure, and the effect of SEC comment letters on non-GAAP earnings comparability. [Extracted from the article]

In this study, we discuss how small audit firms (i.e. non‐Big 4 audit firms) address the staffing crunch during the busy season. Using monthly certified public accountant (CPA) employment data from Korea, we find that the number of CPAs in non‐Big 4 audit firms peaks before the busy season but drops afterward, suggesting the prevalence of part‐time or short‐term employment (i.e. flexible staffing). Flexible CPA staffing is more prevalent in audit firms with lower sales, higher sales growth and lower profitability. We further document that the standard deviation of the changes in monthly CPA numbers within a year is negatively associated with audit fees, implying that flexible staffing enables small audit firms to charge lower fees to clients. Additionally, we find no evidence that flexible staffing significantly impairs audit quality. We also report evidence that non‐Big 4 audit firms attract more clients when they are more flexibly staffed than otherwise. Collectively, non‐Big 4 firms reduce operating leverage via flexible staffing arrangements and share the benefits with clients without compromising audit service quality. [ABSTRACT FROM AUTHOR]

We examine whether corporate political donations (CPDs) are associated with audit fees in the Australian setting. Our baseline results based on observations of Australian top 500 non‐financial companies show that, on average, firms with CPDs are associated with about 9% lower audit fees than firms without CPDs consistent with the strategic investment or resource dependency view. Using path analysis, we next show that high earnings quality resulting from strategic benefits of CPDs explains the association. Overall, these results confirm that firms use CPDs as strategic investments that are associated with lower earnings management, which leads to lower audit risk and hence reduced audit fees. [ABSTRACT FROM AUTHOR]

We examine the relation between the scale and scope of an individual auditor's client portfolio and audit quality. Using a sample of auditor-years for the period of 2001–2016 from China, where the personal identities of signing auditors are publicly disclosed, we find that auditors with large client portfolio scale (measured by an auditor's total audit fees from clients) provide higher quality audits (measured by discretionary accruals and the likelihood of issuing modified audit opinions). However, auditors with large client portfolio scope (measured by the number of industries where clients are located) provide lower quality audits. Further analyses indicate that auditors of higher ability and reputation tend to have larger client scales and wider client scopes. Overall, our results suggest that, at the individual auditor level, the scale of the client portfolio conveys the auditor's ability, and given the scale, the industry and geographic scope of clients reflects the auditor's workload. [ABSTRACT FROM AUTHOR]

This study hypothesizes that distracted auditors affect audit quality. As a result of resources scarcity, auditors pay more attention to financially distressed audit clients rather than non-financially distressed audit clients at the same audit client portfolio which eventually leads to differences in audit quality. In this context, earnings restatement of audit clients is used as a distraction event of auditors. Distracted auditor is measured by the percentage of the audit fees of financially distressed audit clients to total audit fees and audit quality is proxied by total accruals. The data is obtained from firms listed on the US stock market over eleven years between 2010 and 2020. The results indicate that financially distressed audit clients of distracted auditors receive higher audit quality than non-financially distressed audit clients of the same audit client portfolio. Further analysis suggests that this difference in audit quality between financially distressed audit clients and non-financially distressed audit clients decreases with skeptical auditors. This study introduces a new comprehensive approach to measure professional skepticism using KAMs disclosure. The results are robust to different measurements of distracted auditors, audit quality and professional skepticism. Overall, the empirical analyses suggest that distracted auditors have a decreasing differential impact on audit quality by professional skepticism. [ABSTRACT FROM AUTHOR]

Driven by innovation strategy, Chinese enterprises' innovation investment, and research and development capability have been continuously improved, and the audit risk caused by this has attracted widespread attention from the academic community. This study takes China's A-share listed companies from 2013 to 2021 as samples to empirically test the relationship between innovation input and audit pricing of Chinese enterprises. Research shows that the higher the innovation investment, the higher the audit cost. High-quality corporate governance, sufficient research and development personnel, research and development subsidies, and operating cash flow can all play a negative moderating role. A good innovation environment will weaken the positive influence between innovation input and audit fees. This study theoretically confirms the risk-oriented audit pricing mechanism, which is of great significance for optimizing enterprise innovation risk management and improving audit service levels. [ABSTRACT FROM AUTHOR]

We examine whether Audit Fee Regulation (AFR) enhances auditors' bargaining power in setting audit fees, consequently leading to superior quality audit services using the Iranian audit environment. We posit two hypotheses of "symbolic" and "substance" compliance. We find that neither audit fees nor audit quality has increased in the post-AFR era, supporting the symbolic hypothesis. The results are robust to several sensitivity tests, including difference-in-difference analysis. Contrary to the regulator's expectation, our findings suggest that arbitrarily stimulating suppliers' incentives without considering the priority and importance of demand-side incentives in a compliance-driven audit market and the flexibility to bypass the regulation result in symbolic (de jure) compliance with the regulation. We provide policy, practice, and research implications by suggesting that positive intended consequences of regulations in a compliance-driven audit market can be achieved when the regulation is robust with less latitude for discretion symbolic compliance. [ABSTRACT FROM AUTHOR]

As audits of public companies are labor intensive, require a variety of team members, and involve year-round work, practitioners and academics have increasingly focused on identifying audit production factors that drive audit quality. Using proprietary data, we analyze the cost-benefit tradeoffs of two audit production characteristics, client expertise and the relative amount of auditing done during the early phases of the audit, and find that both are associated with more effective audits and higher fees. We analyze whether the influence of these characteristics varies across audit team members. We find that middle manager production characteristics explain audit effectiveness and higher fees and relatively more so than those of lead/review partners. These results extend the literature and practitioner discussions about drivers of audit quality by highlighting the importance of middle management, which, to our knowledge, has largely been overlooked by the archival audit literature and regulatory guidance on audit quality indicators. Data Availability: This paper exploits proprietary PCAOB data. Data descriptions are available in the text. JEL Classifications: D20; D22; J24; L23; M11; M4; M42; M48. [ABSTRACT FROM AUTHOR]

I develop a model that provides new insights into the consequences of the provision of non-audit services (NAS) by audit firms to audit clients. I also investigate the joint implications of NAS and contingent audit fees (CAF) for audit quality. In the model, litigation and reputation costs do not provide sufficient incentives to auditors to exert audit effort. Investors of client firms may therefore let auditors provide NAS because of an incentive effect. Indeed, the possibility of providing NAS contingent on detecting financial misstatements increases auditors' incentives to exert audit effort. However, the provision of NAS also reduces auditor independence, which may decrease audit quality and in turn render the provision of NAS by auditors undesirable. Thus my analysis uncovers an interesting tradeoff for regulators between the positive incentive effect and the decrease in auditor independence. Removing the current restrictions on CAF may offset the ex post decrease in audit quality while preserving the ex ante incentives. My analysis also generates a number of testable empirical predictions. [ABSTRACT FROM AUTHOR]

Purpose: This paper aims to examine the perspectives of auditors, regulators and financial report preparers on the effects of key audit matters (KAMs) reporting on audit effort, fees, quality and report transparency. Design/methodology/approach: The authors conducted 21 semi-structured interviews with stakeholders (13 Audit Partners, 5 Chief Financial Officers and 3 regulators) and thematically analysed the interviews. They use the frame of "Paradox of Transparency" to explain the findings. Findings: Auditors perceive that the overall quality control of their audits has improved both in the planning and execution stages, and such improvement can mostly be attributed to the coercive pressures from professional bodies and regulators. Nevertheless, audit fee remains unchanged. Auditors disclose industry generic items and descriptions of KAMs, sometimes masking the real problem areas of the clients. Even after improving the performative audit quality, transparency of audit reporting has not improved. Issues that warrant going concern qualifications or audit report modifications are now reported as KAMs. Hence, KAMs reporting might make the audit report less transparent. Practical implications: Localised audit environments and institutions affect the transparency of KAMs reporting. Without attention to corporate governance and auditors' independence issues, paradoxically, performative improvement in audit quality (due to the KAMs reporting requirement) does not enhance the transparency of audit reports. Originality/value: To the best of the authors' knowledge, this study is the first to provide field-level evidence in Bangladesh and other developing countries about the perceptions of auditors, financial report preparers and regulators on the effects of KAMs reporting on audit efforts, fees, quality and report transparency. [ABSTRACT FROM AUTHOR]

SUMMARY: Companies are increasingly reporting and assuring sustainability information. Once the decision to assure is made, a company must choose an assurance provider, but should the company use the same firm as its financial statement auditor or a different assurance provider? Lu, Simnett, and Zhou (2023) find that perceived independence concerns deter companies from choosing the same provider, while a provider's assurance expertise and higher levels of information integration between the financial statements and the extended external report both increase the likelihood of using the same provider. Companies using the same provider for both services benefit from higher financial statement audit quality without paying significantly higher audit fees. The findings of this research are useful for companies in deciding whether to employ their financial statement audit firm to also provide assurance of extended external reports. The findings also have implications for auditors and standard-setters/regulators. [ABSTRACT FROM AUTHOR]

SUMMARY: This article provides a summary of recent research by Bratten, Causholli, and Sulcaj (2022), who examine whether issuers with audit committees who report strong oversight over the audit function have higher audit quality. Using a novel dataset from Audit Analytics that summarizes reported audit committee activities, Bratten et al. (2022) create a composite measure that captures the strength of the audit committee's oversight of the audit process. The study uses several measures to capture audit quality, including audit fees, discretionary accruals, and propensity to meet or just beat earnings benchmarks. The authors show that, when issuers' audit committees report activities consistent with being more active in overseeing the external auditor, issuers, on average, have better audit quality. [ABSTRACT FROM AUTHOR]

Prior research indicates that the CEO has a significant impact on financial reporting decisions. However, there is limited research on the implications of CEO succession origin (hiring a CEO from the inside as opposed to from the outside) for auditors. We find that on average, audit fees are greater by about 8% when a CEO is hired from the outside than when a CEO is promoted from within. We also find that the CEO's in-house experience (the number of years the CEO has worked in the firm before becoming the CEO) is negatively associated with audit fees, suggesting that the CEO's in-house experience enhances the CEO's competence in understanding how the firm's performance should map into the financial statements, resulting in lower audit risk. Finally, our findings suggest that the CEO's in-house experience plays an important role in mitigating audit risk in firms with poor corporate governance quality. [ABSTRACT FROM AUTHOR]

Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

We examine whether the media has an indirect corporate governance effect on financial reporting quality (FRQ) that operates through auditors. This occurs because greater media coverage can magnify an auditor's business risk by exposing the auditor to more potential litigation and reputation damage if an audit failure occurs. We use a path analysis to examine the direct and indirect channels of media corporate governance. We find a positive association between media coverage and FRQ that is mediated by audit fees, and the results are stronger for firms with greater incentives to engage in earnings manipulation. In contrast, we find no evidence that the media has a direct corporate governance effect on FRQ. Our results show how the media's corporate governance reach can be extended by auditors who care about how media coverage impacts their risk level. [ABSTRACT FROM AUTHOR]

Drawing on prior studies regarding the use of peers for investment decisions and compensation practices and the recent reports which suggest that firms use peer information for audit pricing, we examine the effect of peer groups on the audit pricing process under high information asymmetry environment. Using observations from the emerging markets of China, we find that peer group information is used in audit pricing with peer groups defined as the Industry, Industry/Region, Industry/Big4, Industry/Size, and Industry/Region/Big4. This is consistent with above complementary theories. We also find evidence that peer group information is more likely to be used by firms from low-technology industries, less developed regions, and firms audited by non-Big 4 CPA firms than those from high-technology industries, more developed regions, and firms audited by Big 4 CPA firms. Also, peer group information is more likely to be used in clients firms with shorter auditor tenure and with lower analyst following compared with their counterparts. Finally, we find that clients with lower audit fees than their peer groups in the previous period are more likely to increase audit fees in the current period. Our results are qualitatively the same regardless of whether we use an overall sample across different industries or for each industry separately. These results are consistent with the peer group literature and also indicate that peer group information is more likely to be used in conditions when information asymmetry is high. [ABSTRACT FROM AUTHOR]

Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This paper investigates the international accounting network memberships' impact on audit fees. We find that, firstly, the audit fees charged by the member audit firms are significantly higher; secondly, if the revenue, ranking or audit and accounting business share of the international network the audit firm join is higher, the charge is also higher. Additional results show that economic policy uncertainty will intensify this positive relationship, and member audit firms charge higher fees by improving their overseas expertise. We also find that international network memberships will reduce abnormal audit fees, and improve the quality of financial reports. [ABSTRACT FROM AUTHOR]

This study employs a pluralistic theoretical framework, integrating the Resource-Based View, neoinstitutional, and governance theories, to identify factors explaining joint audit fees. Utilizing a panel dataset of 116 firms over six years (totaling 696 observations) in France, we apply an extension of generalized linear models to handle non-independent observations. Considering both auditor quality and audited company characteristics, our research expands previous studies on French audit fees, which have predominantly focused on auditor quality. We find that joint audit fees are influenced by firm size, audit team composition, sector of activity, and client company size and director count. However, factors such as the choice of internal control framework, separation of control and management functions, and proportion of independent directors do not significantly impact joint audit fees. [ABSTRACT FROM AUTHOR]

Objective: The objective was to analyze whether companies that restated Financial Statements (FS) experienced changes in auditor fees and replaced the audit firm the year after the event. Method: Data from 323 non-financial companies listed in B3 were analyzed, totaling 2,712 observations (companies/year) between 2010 and 2020. Data were collected from the websites of the Securities and Exchange Commission of Brazil (CVM), ComDinheiro, and the Perlin data repository (2020). Descriptive statistics, the test for difference between means, and regression with panel data were adopted. Results: The companies that restated financial statements paid higher auditor fees in the year after the event and were more likely to replace the audit firm. Contributions: This study is relevant for auditors and members of audit and governance committees as it provides evidence that can support decisions on hiring and dismissing independent auditors. Additionally, it shows that higher fees may compensate for perceived risk while replacing an audit firm after a restatement is a form of punishment and is intended to protect a company's reputation. [ABSTRACT FROM AUTHOR]

Audit disclosure requirements have increased across countries in recent years. In this study, we explore a disclosure pattern that has been adopted by approximately 23 percent of Chinese publicly listed companies and their auditors—the disclosure of up to three overlapping items both in the risk factor section of financial reports and in the key audit matters (KAM) section of the audit report. We predict and find that such disclosure overlaps increase auditor liability, using audit fees as a proxy for auditor liability, and that (1) both the magnitude and explicitness of overlapped disclosure are positively associated with auditor liability and (2) analyst following, Top 10 auditors, and auditor tenure play a moderating role in the association between overlapped disclosures and auditors' perceived liability. Collectively, our analysis supports our hypothesis that KAM disclosure increases auditor liability when coupled with management disclosure of related risk factors. Data Availability: Data are available from the sources cited in the text. JEL Classifications: M41; M42; K41. [ABSTRACT FROM AUTHOR]

This study investigates how auditing changed during the COVID-19 pandemic in two countries, Norway and Ghana. The two countries reflect different levels of digital infrastructure and of government support. We interviewed 23 audit partners and managers during the pandemic (February 2020 to May 2023). The analysis of the responses using the theory of adaptive governance reveals three key findings related to audit adaptation during the 39 months of the pandemic. First, we find an increase in auditors' and clients' willingness to work digitally. In Ghana, the digitalization may be done by scanning documents and uploading them to a shared drive or by using a Shared Service Center (SSC). Second, we find an increase in audit fees over time as inflation increased during the pandemic. Finally, as the pandemic progressed, a shortage of audit staff became a major concern in both countries as auditors left the profession for other jobs. Data Availability: Data are available from the authors upon request. JEL Classifications: M42. [ABSTRACT FROM AUTHOR]

This study aims to extend research on the effect of PCAOB inspections on audit firm behavior by examining generally accepted auditing standards (GAAS) and generally accepted accounting principles (GAAP) type PCAOB inspection deficiencies, separately, to reveal the differential effects on audit fees in subsequent years. We empirically examine the audit fees of 98,393 client firm‐year observations for auditors who received a PCAOB inspection report during 2004–2021 via multivariate regression analyses. We find that GAAS (GAAP) deficiencies are associated with higher (lower) audit fees in the years following the reported deficiency. Our results suggest that the PCAOB inspection process modifies audit firm behavior when GAAS deficiencies are reported leading to the firm charging higher audit fees to defray the costs of addressing the deficiencies, but due to the severity of GAAP deficiencies that are identified, audit firms are willing to negotiate lower fees to retain the client. Our results are primarily driven by annually inspected audit firms. These results suggest that auditors respond to GAAS and GAAP PCAOB inspection deficiencies differently. The results of our study are useful to regulators and policymakers, such as the SEC and the PCAOB, in understanding how auditors respond to PCAOB inspection deficiencies and their due diligence to correct those deficiencies. PCAOB inspections are intended to evaluate compliance with accounting and auditing standards to improve audit quality and our study helps to extend the research to date which has not yet clearly demonstrated whether or not this has been accomplished. [ABSTRACT FROM AUTHOR]

We study whether heterogeneity in pay‐performance sensitivities (PPS) across top management team (TMT) members influences audit fees. Evidence from current literature reveals that the heterogeneity in PPS among TMT affects TMT managers' motivation to coordinate their activities to manipulate earnings. Since the quality of earnings lowers auditors' financial reporting risk, we posit that audit fees will be lower when dispersion in the PPS among TMT is high. We demonstrate that audit fees are negatively linked with dispersion in PPS among TMT members. This finding is robust to numerous sensitivity testing. Overall, our findings suggest that firms benefit from the heterogeneity in PPS among TMT members in the form of lower audit fees. [ABSTRACT FROM AUTHOR]

This paper examines the impact of firm financial misconduct on its director‐interlocked firms from the perspective of auditors. We argue that when a firm engages in financial misconduct, auditors tend to perceive its director‐interlocked firms as having higher audit risks. This is because accounting policies, procedures and corporate governance can propagate via common directors. Using a sample of listed US firms from 1999 to 2018, we find that auditors charge higher fees for firms whose director‐interlocked firms engage in financial misconduct. Further analyses show that this spillover effect is stronger when focal firms are riskier (when they are financially distressed or have worse earnings quality) or they have weaker alternative monitoring mechanisms (as evidenced by lower institutional shareholding). The effect is also more prominent when the tainted directors hold important positions or the financial misconduct is more severe. We also find that the higher auditor fees arise from not only risk premium but also greater audit effort. Our results are still valid after conducting a series of robustness tests. [ABSTRACT FROM AUTHOR]

This study investigates the relationship between Confucianism and auditor judgment. Using a sample of Chinese listed firms from 2006 to 2019, we find that the Confucian atmosphere in auditors' hometowns is positively associated with their audit adjustments. The mechanism analyses show that Confucianism in auditors' hometowns can influence auditor morality and further affect their judgment. We also find that the positive relationship between Confucianism in auditors' hometowns and audit adjustments is reinforced by auditor exposure to strong Confucian atmospheres in their places of education and workplaces but weakened by Western culture diffusion. Moreover, auditors who are more influenced by Confucianism are associated with more improvements in client financial reporting quality, more upward and downward adjustments, more small and large adjustments and more audit effort but not higher audit fees. Overall, this study provides evidence that supports the imprinting effect of traditional Confucianism on auditors. [ABSTRACT FROM AUTHOR]

In this study, we investigate whether and to what extent country‐level board reforms affect audit pricing decisions. We find audit fees are positively associated with board reforms. An increase in audit fees is more pronounced for firms that switched up to Big N auditors following board reforms. After board reforms, firms are less likely to issue restatements, and both analyst forecast accuracy and management forecast frequency increase, indicating improved audit quality and information transparency in the postreform period. Moreover, the positive relation between board reforms and audit fees is more evident for firms in countries that lack institutional governance mechanisms, captured by emerging capital markets, high political risk, weak governmental enforcement actions and low corporate governance quality. Overall, our findings broadly support the view that audit fees increase upon demand for better audit quality. [ABSTRACT FROM AUTHOR]

The purpose of this research is to examines how is the competition and pricing for audit services in the audit service market in Indonesia from the perspective of the auditors. This study uses a questionnaire with auditor respondents at manager level to audit partners. The data analysis technique used in this research is descriptive statistical analysis. By using a total of 414 respondents from audit firms Big 4 and non-Big 4, this research found that most of the respondents considered the audit service market competition in Indonesia to be high and agree that competition for audit services creates pressure that creates relatively low audit fee in Indonesia. The results of this study confirm and strengthen previous studies which using secondary data that the level of concentration of the audit services market is related to the level of competition for audit services and create pressure to reduce audit fee. The implication of this research is that further research needs to be carried out using more objective secondary data to examine the impact of the level of competition of audit services on audit fees and audit quality as well as evaluating whether regulations are needed to determine minimum audit fees. [ABSTRACT FROM AUTHOR]

The present study on the manufacturing and services firms of NSE 500 Index, India, examines the impact of audit committee characteristics and auditor's remuneration on the firm performance as measured by accounting (ROA) and market measure (Tobin's Q and ROE) of firm performance. Audit committee size has a positive impact on firm performance (as measured by Tobin's Q), but it was not observed with ROA and ROE, and, on the other hand, had a negative significant impact on firm performance (as measured by ROA and ROE). Auditor remuneration also had a significant negative impact on overall firm performance. The percentage of grey, independent, and executive directors did not have any significant impact on firm performance overall, implying that although auditors' independence is crucial, as per the Companies Act (2013), it eventually seems to hamper firm performance, as auditors' independence plays a fair role and earnings management practices are reduced to a minimum. Moreover, the auditor's remuneration also has a significant negative impact on firm performance, stating that the auditor's remuneration and, in turn, usually independent auditors are critical in the valuation of the firm, which supports firm performance in the long run. However, non-audit fees did not have any significant impact on firm performance, and audit committee meetings had a positive significant impact on firm performance in the long run. [ABSTRACT FROM AUTHOR]

Using a recently developed proxy for retail investor attention to 10-K filings on EDGAR, we investigate the relationship between retail investor attention and audit fees. We find that retail investor attention is positively related to audit fees and negatively related to earnings quality. Our result is consistent with the notion that managers of firms with high retail investor attention are more likely to manipulate earnings. We also find that retail investor attention to 10-K filings is a relatively more important source of firm-specific information for small firms than for large firms. Collectively, we find that retail investor attention plays a significant role in audit pricing. Our results are robust even after controlling for omitted variable bias, endogeneity, and alternative retail investor attention measures. JEL Classifications: M41; M42. [ABSTRACT FROM AUTHOR]

This study investigates whether auditors' experiences with their clients' cybersecurity incidents affect their subsequent audits for nonbreach clients and help those clients reduce cybersecurity risks. We find that audit offices who have experience with cybersecurity-breached clients, ceteris paribus, charge higher audit fees from nonbreach clients. Additionally, the increased audit fees conditional on auditors' cybersecurity experience are negatively associated with nonbreach clients' future breach incidents. Such associations are found only in the Big 4 audit offices and offices with IT capability. This study offers timely insights for standard setters and important implications for both professionals and the academic literature by documenting the spillover effect of cybersecurity experience on subsequent risk assessments of nonbreach clients, while also confirming the effectiveness of engaging auditors in addressing cybersecurity matters. Data Availability: Data are available from the public sources identified in the article. JEL Classifications: M42. [ABSTRACT FROM AUTHOR]