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In this study, we examine the association between audit fees and client participation in underfunded multiemployer pension plans. Consistent with our hypothesis, our regression results find that audit fees for firms with underfunded balances in multiemployer pension plans (MEPPs) are consistently higher and statistically significant compared with firms without MEPPs after controlling for other factors known to influence audit fees. The fee premium for firms with a net underfunded plan balance is 6.2%. Thus, the magnitude of the economic effect appears to be an average increase in audit fees of about $280,240. Furthermore, we find a significant inverse relationship between audit fees and estimated MEPP underfunding when firms with higher unionization levels. Our findings are likely to be of interest to standards-setters, regulators, and policymakers in the United States, European Union, and other countries as appropriate. [ABSTRACT FROM AUTHOR]

Institutional investors have a better understanding of corporate performance than non-institutional investors, and their presence tends to improve the overall governance mechanism of a company and discipline top management against taking self-serving or myopic decisions. In this study, we examine shareholder voting patterns on auditor reappointments in Indian companies and examine whether institutional shareholder dissent on auditor reappointment acts as a disciplining mechanism on subsequent auditor actions and leads to improvement in audit quality. Our results indicate that institutional shareholder dissent on auditor reappointment is positively related to relative magnitude of non-audit services (NAS) fees in the previous year. More importantly, we observe that auditors are sensitive to institutional dissent and respond by charging a lower amount of NAS fees and providing superior audit quality in the subsequent year to signal increased independence and objectivity. Similar results are not observed in the case of retail shareholders. Our findings reinforce the role of institutional shareholders as important monitors in the corporate governance process and call for regulation to mandate the participation of shareholders in the auditor appointment process. [ABSTRACT FROM AUTHOR]

We examine whether and how auditors incorporate rollover risk in assessing a client's risk. Rollover risk is the risk associated with long-term debt maturing in 1 year, which has to be refinanced or settled shortly. Debt has two counteracting effects on firms' riskiness: increased liquidity risk and increased monitoring. The finance literature suggests that rollover risk is an apparent risk factor because it results in high liquidity risk but only a weak (or limited) monitoring benefit. Consistent with that literature, we show that auditors increase audit fees, exhibit a higher likelihood of issuing a going-concern opinion, and terminate relations with their clients more frequently as rollover risk increases. Our study is the first in the audit research literature to document that auditors factor rollover risk in their pricing, going concern, and client portfolio decisions. [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.)

This study provides new evidence on the influential role of external auditors in enhancing the informativeness of form 10-K annual reports to shareholders. Specifically, we find that the client's choice of a Big 4 auditor (PwC, EY, KPMG, and Deloitte) versus a non-Big 4 auditor contributes to cross-sectional variations in 10-K disclosure volume. We also document that the benefit of enhanced disclosures provided by Big 4 auditors is more pronounced for audit clients with poorer accrual quality and those with higher information asymmetry. Furthermore, we introduce the portion of 10-K length unexplained by operating complexity and observable client characteristics as a new proxy for audit firm effort. Specifically, we find that abnormally long disclosures are associated with higher audit fees and longer audit report lag, which implies that an incremental level of audit effort can be inferred from the discretionary component of 10-K disclosures. As audit effort is costly, a greater volume of 10-K disclosures can be expected to be associated with an improvement in the quality of financial reporting. Overall, our findings show that auditors play more than a simple attestation role in the financial reporting process, and that the quality of financial reporting in a company's 10-K annual report is a joint product of the effort and decisions of both a company's managers and its auditors. [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.)

SUMMARY: Share pledging is an important source of financing for shareholders in China. We investigate whether auditors respond differently in terms of audit reporting and pricing when client firms' controlling shareholders pledge their shares to support their firms' financing (business-pledging firms) or to increase their personal wealth (individual-pledging firms). Based on data from listed nonstate-owned Chinese firms, we find that auditors are less likely to issue modified audit opinions and more likely to charge lower audit fees to business-pledging firms than to individual-pledging firms. Additional evidence indicates that business-pledging firms have better financial reporting quality than individual-pledging firms. Taken together, our results suggest that auditors' assessments of clients' business and audit risks are associated with the objectives of controlling shareholders' share pledging, which has significant policy implications for capital market participants. Data Availability: Data are available from the public sources cited in the text and from the corresponding author upon request. JEL Classifications: M42; O16. [ABSTRACT FROM AUTHOR]

This study attempts to obtain an understanding of the impact of adopting big data and data analytics (BD&A) on various dimensions of the audit profession. This study aims to examine the effect of adopting BD&A on the audit process, auditor competence, and audit fees in a developing context, Egypt. It also examines the mediating effect of auditor competence on the association between BD&A, audit process, and audit fees. A questionnaire was developed and distributed among financial auditors, IT/IS auditors, and data analytics specialists working for audit firms with different sizes in Egypt. Responses from 205 audit practitioners were collected. Partial least square structural equation modeling was employed to test the research hypotheses. It was revealed that BD&A has a significant positive impact on the audit process and auditor competence. However, an insignificant association between BD&A and audit fees was found. Also, the results indicated that there is a positive significant relationship between auditor competence and audit process, and between auditor competence and audit fees. The mediation analysis reveals that auditor competence partially mediates the relationship between BD&A and the audit process. This indicates that while BD&A directly enhances the audit process, its full potential is realized when auditors possess advanced competencies. In contrast, the relationship between BD&A and audit fees is fully mediated by auditor competence, reflecting the critical role of skill development in justifying fee adjustments. [ABSTRACT FROM AUTHOR]

The financialization of real enterprises presents a dilemma for China's economic development. This study examines the impact of the financial asset allocation term structure on audit fees using a sample of Chinese A-share listed companies from 2009 to 2019. It also investigates the mediating role of financial risk and the moderating role of independent director characteristics. The results indicate that higher long-term financial assets is associated with higher audit fees, while short-term financial assets show no significant relationship with audit fees. These findings remain robust after several tests. Financial risk mediates the relationship between long-term financial assets and audit fees. Furthermore, among the characteristics of independent directors, the proportion of female independent directors and those with a financial background negatively moderate the relationship between long-term financial assets and audit fees, while independent directors with an overseas background and academic credentials positively moderate this relationship. Additional analysis reveals that firm size and financing constraints exhibit heterogeneity in their effects. This study contributes to the literature by enhancing our understanding of the factors influencing firms' financial asset allocation and audit fees, and by expanding the literature on the financial risk and characteristics of independent directors. [ABSTRACT FROM AUTHOR]

Purpose: The present study examines the impact of corporate governance attributes on audit quality in the context of an emerging market, India. The study is based on data from 100 non-financial firms listed on the Bombay Stock Exchange randomly selected from the list of BSE 500 firms on 31 March 2021 for 2017–2021. Aim: To measure audit quality using two input-based measures – audit fee and audit firm size (Big-4 or non-Big-4). Design/Methodology/Approach: This study uses logistic regression and panel data regression models to investigate the impact of corporate governance variables on audit quality after controlling for some firm-specific variables. Furthermore, a generalised estimating equation model is used to check the robustness of the logistic regression model results. Main findings: The results indicate that board independence, board gender diversity, multiple directorships, and audit committee independence positively correlate with audit quality. However, the board size, role duality, and promoter shareholding are negatively associated with the audit quality. Further, the quantile regression results indicate heterogeneous impacts of role duality and promoters' shareholding on audit quality. Practical implications: First, firms with the concentration of power in the hands of promoters directly or indirectly may engage Big-4 auditors to enhance AQ. Second, policymakers should take appropriate steps to enhance the gender quota as per international norms to improve the quality of financial reporting. Third, firms' should capitalise on the enhanced advisory capability of the directors having exposure and association with other companies. Novelty/Contribution: The study enriches the existing literature by providing empirical evidence from an emerging nation characterised by the dominance of promoters' shareholding, busy boards, and role duality. [ABSTRACT FROM AUTHOR]

In this study, we identified firms receiving COVID-19-related audit report disclosures through critical audit matter (CAM) mentions of COVID-19 in their audit reports. Through OLS regressions, we then investigated the fundamental accounting and auditing determinants that predict the likelihood of firms to receive these COVID-19-related disclosures, and found that firms with intangibles and goodwill were more likely to have these mentioned in their audit reports. Next, we examined the content of these disclosures and found that auditors' COVID-19 disclosures focused on significant accounting estimates (e.g., fair value accounting and asset impairment considerations). These results are consistent with the idea that COVID-19-related uncertainty represented a triggering event to firms, who then reassessed the carrying value of these long-term assets. After exploring the spillover effects to outsiders, we found that investors obtained a 7.3 basis point for abnormal returns following COVID-19 report disclosures and that auditors were able to charge these firms USD 452,000 higher audit fees relative to benchmark firms. The results are also consistent in entropy-balanced estimations and two-stage analyses that address endogeneity. [ABSTRACT FROM AUTHOR]

Purpose: This paper aims to explore the potential effect of key audit matters (KAM) on the audit report lag (ARL). In particular, it aims to discover whether the number of KAMs reported by an audit firm in Jordan is related to the length of its ARL. Design/methodology/approach: The authors analysed data from the first three years of KAM reporting in Jordan (2017–2019) for 194 public listed Jordanian companies to examine the relation between the number of KAMs and the ARL, taking into account several control variables related to the Jordanian context. Findings: This study found that there is no statistically significant relation between the number of KAMs reported by Jordanian audit firms and their ARLs, suggesting that the KAM reporting in Jordan is somewhat superficial, with the selection of what is actually reported as a KAM not directly related to the efforts needed to deal with its concerns. However, this study also found statistically significant positive relations between the ARL and each of audit fees, audit firm size, the issuance of a qualified audit opinion and company leverage and a statistically significant negative relation between the ARL and company profitability. Originality/value: This is one of the very few studies to cover the potential relation between KAM reporting and the ARL. In a developing country context characterised by limited demand for an external audit of high quality, this study finds that auditors may decouple on their reporting of KAMs by not actually making significant efforts to deal with them. [ABSTRACT FROM AUTHOR]

Purpose: This study examines the relationship between school ties among external auditors and audit committee members, and their joint impact on audit fee. We also examine how the monitoring and executive functions within companies moderate this relationship. Design/methodology/approach: This study employs a regression analysis model on a sample of companies listed on the Indonesia Stock Exchange from 2016 to 2019, followed by additional analyses using high-low growth and tech samples, as well as robustness tests involving coarsened exact matching (CEM) and Heckman's (1979) theory to address potential causality issues. Findings: This study reveals that school ties between external auditors and audit committees positively influence audit fee. The audit committee size weakens this relationship, while the presence of an internal audit enhances it. Research limitations/implications: This research contributes to the literature related to the relationship between school ties and audit fee in Indonesian public companies, providing insights for stakeholders and informing company policies. It aims to increase awareness of the significance of school ties among Indonesian companies. Originality/value: This research fills a knowledge gap by examining the link between audit committee-external auditor relationships and audit fees, aiming to generate new insights and empirical evidence to inform future research and regulatory decisions. [ABSTRACT FROM AUTHOR]

This study investigates the impact of the readability of financial reports on audit fees. Moreover, it explores how various contextual factors affect the relationship between readability and audit fees from the perspectives of information provision, transmission and reception. Considering listed firms in the Chinese market, this study demonstrates the significant negative effect of financial report readability on audit fees. However, this association is weakened by annual report similarity, the board secretary's social capital and auditors' industry expertise. Furthermore, this study demonstrates that audit fees increase because of both prolonged audit delays and information asymmetry resulting from low readability. By presenting empirical evidence to substantiate the rationale and necessity for enhanced textual readability requirements, this research can provide valuable insights for corporations to improve the effectiveness of their information communication to external stakeholders, which is very important for enhancing financial report quality and aligns with the primary focus of standard setters. [ABSTRACT FROM AUTHOR]

This study investigates the Big 4 effect for a new‐to‐the‐world audit service. Based on unique data from the Danish COVID‐19 fixed cost support scheme we analyse differences in audit fees and two measures of audit quality across Big 4 and non‐Big 4 engagements. Our findings suggest that firms engaging with Big 4 auditors experience more successful outcomes in the application process and are willing to pay a Big 4 premium for comparable assurance services. Clients of Big 4 auditors are, on average, more likely to receive full compensation, and experience fewer rejections during the application process than clients of non‐Big 4 auditors. This research has implications for policymakers and companies. [ABSTRACT FROM AUTHOR]

This study employs the measurement of the cost of compliance with all federal paperwork regulations to examine the association between regulatory intensity and audit fees at the company level. Using a sample of US companies from 2003 to 2019, I find that regulatory intensity is positively associated with audit fees, suggesting that firms facing a heavier burden of regulatory compliance tend to incur higher audit fees. The findings are supported by various robustness tests. I also document a positive association between regulatory intensity and audit report lag. Moreover, I find that the positive relation between regulatory intensity and audit fees is more pronounced among firms in high‐litigation industries, which are typically subject to elevated litigation risks. This study contributes to the existing literature by providing new evidence on the relationship between regulatory intensity and audit fees, utilizing a novel and rigorous measure that captures the intensity of a broad range of regulations. [ABSTRACT FROM AUTHOR]

Auditing is a credence good so its quality cannot be determined directly. The gain or loss of large clients is one publicly available signal that can used by other clients to ascertain the quality provided by audit firms. This paper examines whether this quality signal results in firms earning fee premiums and discounts. Empirical examination of a sample of 16,233 firm‐years of listed Australian companies for the period 2011–2021 shows that there is an association between offices and industry groups that gain and lose large clients, in both the current and previous periods, and economically significant fee premiums for both Big‐4 and non‐Big‐4 firms. These results suggest that clients can use auditor portfolio changes as quality signals and that they appear to reward firms that gain large clients and prune their portfolios of poor clients, particularly if these changes are in the same industry as the client. [ABSTRACT FROM AUTHOR]

This paper examines the effect of audit committee-auditor interlocking on the audit fees in a sample of listed Chinese companies from 2005 to 2018. It is found that audit committee-auditor interlocking significantly increases the audit fees, and this positive relationship is more significant in better external governance environments, as measured by the marketization level, legal environment, regulatory intensity, and analyst attention. Further analyses show that the interlocking has a greater positive impact on audit fees when it is caused by the audit committee chair, audit partner, and industry specialist auditor, and when the interlocking companies are operating in the same industry. The interlocking relationship also increases audit quality and reduces the stock price crash risk in which the audit fees play the mediating role. The results suggest that it's the reputation mechanism that motivates audit committee directors and auditors in interlocking relationships to increase audit fees and audit quality. We provide practical implications for auditors, listed companies, investors, and regulators in aspects of increasing audit fees and audit quality, protecting investors' interests, and improving the external governance environments. [ABSTRACT FROM AUTHOR]

The article is devoted to the search for ways to resolve certain topical issues of legal regulation of public oversight of audit activities in Ukraine. In particular, there is a legal uncertainty in the part of financial and legal relations concerning the financing of activities of the bodies authorized to exercise public oversight of audit activities at the expense of contributions from audit entities providing audit services to certain specified categories of legal entities and their associations. It is substantiated that it is the shortcomings of legal technique made by the legislator when amending the Law of Ukraine 'On Audit of Financial Statements and Auditing Activities', which came into force on 1 January 2023, which led to legal uncertainty regarding the amount of fixed fees paid by audit entities to the Public Oversight Body for the provision of audit services to political parties receiving funding from the State budget, State-owned enterprises (except for those which are microand small-scale enterprises), and also to the fact that the latter are not subject to the requirements of the law. As a result, the Public Oversight Body may open unreasonable disciplinary proceedings against audit entities and impose penalties at the discretion of the public oversight officials with discretionary powers. Based on a systematic analysis of the provisions of the Law of Ukraine 'On Audit of Financial Statements and Auditing Activities', the author provides a doctrinal interpretation of these provisions on payment of contributions and concludes that legal uncertainty arose as a result of the shortcomings of legal technique made by the legislator in the course of drafting these provisions. The author proposes to introduce appropriate amendments to the relevant law which would eliminate this legal uncertainty. Prior to introducing the relevant amendments, the author substantiates the need for the Ministry of Finance of Ukraine as the State regulator in the field of audit activities to provide an official interpretation of the current rules. [ABSTRACT FROM AUTHOR]

Copyright of International Journal of Professional Business Review (JPBReview) is the property of Open Access Publications LLC 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 article investigates the connection among Top Management Team (TMT) characteristics and audit quality, focusing on how leadership attributes such as expertise, diversity, tenure, and risk management influence corporate governance and audit outcomes. Given the increasing demands for transparency, accountability, and robust financial reporting, the involvement of TMTs in guaranteeing audit quality has become more critical. We reviewed 255 articles published between 1996 and 2021 to analyze key trends, core publications, and influential themes related to TMT characteristics and audit quality. The study uses bibliometric analysis tools, including co-occurrence networks and thematic maps, to uncover the central themes in the literature. Audit quality, corporate governance, and audit fees emerged as dominant topics, while emerging areas such as board quality and internal audit quality suggest new opportunities for future research. The findings underscore the pivotal role of TMT characteristics in shaping governance practices, demonstrating that strategically shaping TMT composition through board size, diversity, and expertise can significantly enhance audit quality, reduce aggressive earnings management, and improve overall governance frameworks. This research provides practical insights for industries, particularly large enterprises and the banking sector, where audit quality is critical for maintaining financial stability. It also contributes to the academic literature by underscoring the interconnectedness of TMT characteristics and audit quality, offering valuable recommendations for scholars and practitioners. Organizations can optimize leadership structures to ensure stronger governance and reliable financial reporting by understanding how TMT attributes influence audit processes. [ABSTRACT FROM AUTHOR]

SYNOPSIS: We examine whether critical audit matter (CAM) disclosures contain information about material misstatement risks that is priced in audit fees. We find that textual features of auditors' risk descriptions and the types of risks identified capture fee-relevant information. Further, the results are incremental to other determinants of audit fees considered in prior research and to managements' disclosures in the related notes to the financial statements. Overall, we provide evidence that auditors' perceptions of audit risks revealed in the newly expanded audit opinion capture information relevant for understanding audit pricing decisions. Data Availability: All data are publicly available from the sources identified in the paper. JEL Classifications: M41; M42; M48. [ABSTRACT FROM AUTHOR]

Mechanical correlation bias is inherent in audit pricing studies when independent variables (X) are derived from firm level audit fees (Y). Such variables are endogenous by construction leading to biased estimates, since (mechanically) X determines Y and Y determines X. After reviewing the extant auditing/accounting literature where mechanical correlation obtains we employ mathematical derivations and simulations to quantify the bias associated with a range of mechanically correlated market competition and industry specialist variables. Since auditor market competition variables are important to regulators and antitrust authorities, we analyze the mechanical correlation issue with regard to an extant study which introduces a novel measure of audit market competition (derived from audit fees). The study provides evidence that smaller incumbent auditors are pressured into offering lower fees when competing against a large local audit firm. However, when the current client's audit fee is 'decoupled' from this new competition measure to mitigate bias, it is statistically insignificant in our multivariate regression analysis. Additionally, we employ auditee sales and total assets to construct proxies for competition variables (which are not mechanically correlated) and find them to be statistically insignificant. We conclude with suggestions of how to address the issue of mechanical correlation in future studies. [ABSTRACT FROM AUTHOR]

The most recent financial crisis exposed to the auditors the risk associated with the audit engagement of their banking clients. Because many banking clients failed and investors suffered trillions of dollars in losses, auditors are now defendants in numerous shareholder and regulatory lawsuits. There is consensus that the financial crisis was created by an abundance of credit, excessive risk taking through complex financial instruments, weak corporate structures, and ineffective regulatory mechanisms. In this study, we examine how the financial crisis has affected the audit engagements of banking clients. We examine audit fees, audit report lag, and auditor changes before and after the financial crisis with respect to specific bank risks like credit risk, interest rate risk, and liquidity. Overall, we find that auditors are more responsive to bank risks in the post-financial crisis period compared to the pre-financial crisis period. [ABSTRACT FROM AUTHOR]

Copyright of International Journal of Professional Business Review (JPBReview) is the property of Open Access Publications LLC 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 examines the effect of corporate social responsibility (CSR) spending to cater to the local area's needs (the area of business operations) in reducing the firm's risk in the mandatory CSR setting. Using a sample of 1677 Indian firms spanning the financial year 2009–2022, we present several interesting results. First, we demonstrate that the risk of the firms eligible under mandatory CSR law is higher than those not qualifying. Second, we find that the risk of firms that focus their CSR on the local area's needs is lower. In an additional analysis, we demonstrate that firms with higher spending on the local area experience lower contingent liability, legal expenses, and audit fees. We illustrate that focusing on the local area's needs in CSR efforts retains signaling value under a mandatory CSR regime. [ABSTRACT FROM AUTHOR]

This systematic literature review synthesizes and maps existing research on auditing in family firms across multiple areas of study. The review includes 71 systematically selected academic articles published through to 2023. Our findings suggest that many audit-related issues, such as audit fees, audit quality, and auditor choice, differ significantly among family and nonfamily firms. Our review suggests that the positioning of the issues across different disciplines adds complexity and, to some extent, hinders the development of the field. This complexity, resulting from the intermixing of multiple concepts from different disciplines, pushes the majority of the reviewed articles toward theoretical singularity rather than a leap forward in terms of empirical relevance or theoretical plurality. By developing a field map that identifies gaps in current knowledge, our review not only suggests improvements to the status quo, but provides future research directions inspired by recent developments in family business and auditing. [ABSTRACT FROM AUTHOR]

Purpose: This study aims to examine the mediating role of audit seasonality on the association between audit fees and audit quality in Nigerian deposit money banks. Design/methodology/approach: The sample comprises 14 banks with annual financial statements between 2008 and 2020. The modified Baron and Kenny's (1986) causal mediation model by Iacobucci et al. (2007) through the use of bootstrapped partial least square structural equation modelling and Sobel's (1986) z-test is adopted to achieve this study's objective. Findings: The results of the causal mediation analysis show evidence of a fully mediating role of c between audit fees and audit quality in the Nigerian banking industry. Research limitations/implications: This study extends the body of knowledge by demonstrating how audit fees influence audit quality through audit seasonality as a mediator in line with the job demands-and resources and conservation of resources theories. Regulatory authorities should be wary of policies that will further increase the workload of already burdened personnel of audit firms as the uniform fiscal year-end of 31 December introduced in the Nigerian banking system has unintended consequences on audit fees and audit quality. Originality/value: To the best of the author's knowledge, this is one of the first studies to provide evidence on the indirect association between audit fees and audit quality. [ABSTRACT FROM AUTHOR]

SUMMARY: We study the effect of borrower-lender cross-ownership on the demand for a borrower's external audit quality in syndicated loan settings. Cross-owners, which are institutional investors who hold the equities of both the borrower and the lead lender of syndicated loans, have the ability and incentive to increase the economic benefits accruing to both contracting parties. We hypothesize that cross-owners demand high-quality audits of the borrower's financial information as a delegated monitoring device to resolve the agency cost of debt and improve contract efficiency. Our evidence shows that cross-ownership is positively associated with higher borrower audit fees, our proxy for audit quality. We also find that the effect is more pronounced for larger loans. Overall, these results suggest that cross-owners view external audits to be a viable monitoring mechanism for improving overall debt contacting efficiency. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: M42; M48. [ABSTRACT FROM AUTHOR]

SUMMARY: This study examines whether competitive pressure from peers within a local office (i.e., internal competition) affects audit partners' audit pricing decisions. Using U.S. audit partner data from 2016 to 2022, we find that audit partners respond to internal competition by charging their clients lower audit fees. The effect is more pronounced for initial audit engagements, in more competitive local audit markets, and when peers share similar personal attributes, such as sex and experience. However, the effect is weaker for industry specialist audit partners. We also find evidence that internal competition is negatively associated with audit quality for non-Big 4 clients. Overall, this study provides initial evidence of the effect of internal competition among audit partners on audit outcomes. [ABSTRACT FROM AUTHOR]

This study provides novel evidence on the magnitude of switching costs in auditing. Using a discrete choice approach, we infer switching costs from clients' audit firm choices. The demand estimation reveals that switching costs are significant and vary by direction, with the highest costs associated with switching from non-Big 4 to Big 4 audit firms. Counterfactual analyses of forced switches suggest that switching costs are substantial, ranging from 0.7 billion U.S. dollars (14.2 percent of audit fees) to 1.2 billion U.S. dollars (24.0 percent of audit fees) when aggregated across all clients. Counterfactual analyses of voluntary switching show that the audit market would become highly dynamic and more concentrated if switching costs were removed. Additionally, clients would gain consumer surplus of up to 306 million U.S. dollars (5.4 percent of audit fees) in such a scenario. Overall, our study documents the importance of switching costs for understanding audit market dynamics. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: M42; M48; L11; L84. [ABSTRACT FROM AUTHOR]

This study aims to respond to the new auditing standard on the information reporting of Key Audit Matters (KAMs) as a separate section in the auditor's report, which will increase the transparency and quality of the report. It not only explores the current practice of KAM reporting among Thai listed companies but also seeks factors that influence KAM reporting in Thailand. This study explores the quantitative methodology through secondary data collected from the Thai Stock Exchange. This archival research explores 343 listed companies in the Thai Stock Exchange from 2016 to 2020. Descriptive statistics, a correlation matrix, and regression analysis are employed. The results suggest that the type of auditor (Big 4 or non-Big-4 audit firms), audit fee, audit independence, and industry have a direct positive impact on Key Audit Matter reporting at a 0.05 significance level. However, the evidence also suggests that the presence of females on the board, year, ROA (return on asset), risk, and size were not validated factors that have direct positive impacts on Key Audit Matter reporting at a 0.05 significance level. [ABSTRACT FROM AUTHOR]

Using the staggered adoption of data breach disclosure (DBD) laws, this paper studies the impact of mandatory disclosure of adverse corporate events on audit fees. DBD laws increase the frequency of disclosed cyber incidents, which adversely impacts firms' financial condition and operations; this could result in a higher risk of misstatement and reputation loss for auditors. Consistent with this hypothesis, we find that auditors charge higher fees after the adoption of DBD laws. We also find that the increase in audit fees is more pronounced in firms with higher cyber risk and greater auditor reputational concerns. Furthermore, governance mechanisms and resources that are available to auditors can mitigate the rise in audit fees. Robustness tests suggest that the effect is not driven by realized cyber incidents and other contemporaneous events. Overall, our study provides evidence that the mandated disclosure regulation significantly affects audit pricing. [ABSTRACT FROM AUTHOR]

In response to growing pressure on companies to manage and improve their reputation regarding environmental, social, and governance (ESG) issues, the audit is regarded as a vital resource for ensuring ESG risk management, improving transparency, mitigating opportunistic constraints, and guaranteeing accurate reporting. The objective of this paper was to investigate the role of audit quality in improving ESG performance, as well as to examine the role of media coverage represented by ESG controversy score in moderating these relationships. We analyzed 303 Chinese companies with 2,121 observations covering the period from 2017 to 2023. The results suggest that the effects of audit quality as measured by the Big 4 and audit fee on improving ESG performance are positive but not significant. On the other hand, the results reveal that media coverage serves as a positive, albeit non-significant, moderating variable between audit quality measured by the Big 4 and ESG performance, while it has a significant negative effect when audit quality is evaluated based on audit fees. The results indicate that improving ESG performance is significantly linked to auditors intensifying their practices and implementing their work more stringently. More importantly, media coverage is an important additional driver and economic incentive that encourages companies to steer clear of poor ESG-related practices. [ABSTRACT FROM AUTHOR]

Auditing standard 701 "Communicating Key Audit Matters (KAMs) in the Independent Auditor's Report" will be implemented in Indonesia in 2022. The communication of KAMs aims to increase the transparency of financial statements for users. This study examines the effect of audit fees, Size of public accounting firm, company size and leverage on the communication of Key Audit Matters (KAMs). The research population is companies that are listed on the Indonesia Stock Exchange and report audited financial statements for the fiscal year 2022. The sample was selected using purposive sampling method. The research data was processed using the Multiple Linear Regression method using IBM SPSS Statistics software ver. 25. This study proves that audit fees (sig 0.000 < 0.05) and Size of public accounting firm (sig 0.000 < 0.05) have a positive and significant effect on communicating KAMs. While company size (0.188 > 0.05) leverage (0.378 > 0.05) has no significant effect on communicating KAMs. Based on the results of the study, it is hoped that companies can consider an adequate audit fee budget and choose a Public accounting firm whose competence is in accordance with the conditions of the company to be able to increase the communication of KAMs. Thus, companies can increase investor and other stakeholder confidence through the communication of KAMs as an effort to demonstrate commitment to transparency and good corporate governance. [ABSTRACT FROM AUTHOR]

This study examines the relationship between country‐level corruption and audit pricing decisions across EU27 countries. Using a sample of 29,607 firm‐year observations for the period 2011–2021, I find that firms headquartered in more corrupt countries pay higher audit fees and have longer reporting lags. I also show that this relationship is stronger after the EU audit reform came into force in 2016. The results suggest that auditors respond to corruption risk stemming from the broader macroeconomic environment by increasing audit fees and audit effort. In additional analyses, I show how the association between audit fees and corruption varies across firm industries, and I document that female engagement partners tend to be more sensitive to corruption risk than their male counterparts. Ultimately, I find unexpected evidence indicating that financial reporting quality, proxied by discretionary accruals, is not adversely affected by corruption. This study addresses prior calls for a more granular understanding of external factors in audit research and provides the first European evidence of the association between corruption and auditor responses. The implications of this study should be particularly relevant for researchers, market participants and regulators. [ABSTRACT FROM AUTHOR]

We examine how non‐financial misconduct by corporations impacts audit outcomes. We use a novel database of penalties received by firms from federal, state and local agencies for legal violations not directly related to their financial reports and find that auditors raise fees following these violations. The magnitudes are economically significant: violating firms pay about $162,000 or 6% more in audit fees than comparable firms without violations. Additionally, auditors charge more when the penalty amounts are higher and infractions are more egregious. Companies fined for non‐financial misconduct are also more likely to receive going concern opinions. Our results are robust to propensity score matching, falsification tests and firm‐fixed effects and are not attributable to lax firm culture or "tone at the top". These results highlight that firms' unethical conduct, even those that do not directly lead to financial reporting infractions, has consequences beyond just the penalties imposed by enforcement agencies. [ABSTRACT FROM AUTHOR]

Purpose: This paper aims to investigate whether the two dominant financial reporting regimes, US Generally Accepted Accounting Principles (US GAAP) and International Financial Reporting Standards (IFRS), are associated with audit pricing and audit report lags. Design/methodology/approach: In 2007, the US SEC eliminated the requirement for foreign registrants to reconcile their financial statements to US GAAP from IFRS. In this post-reconciliation setting in the USA, the authors use panel ordinary least square regressions to examine a sample of foreign firms cross-listed in the USA reporting under IFRS and US domestic firms reporting under US GAAP during the fiscal year 2007–2019. Findings: The authors find that the firms reporting under IFRS have longer audit report lags than firms reporting under US GAAP. In addition, the authors find that firms reporting under IFRS pay higher audit fees than their US GAAP counterparts. The results are robust after controlling for the firm- and country-specific characteristics as well as using propensity-score matching. Originality/value: To the best of the authors' knowledge, this study is the first to provide empirical evidence that the differences between the two reporting regimes are associated with auditor behavior, possibly through additional audit efforts and audit complexity associated with auditing the principle-based IFRS relative to the rule-based US GAAP. [ABSTRACT FROM AUTHOR]

Although prior research has recently begun to examine the effects of independent director reputation incentives and the benefits of having a lead independent director, no study has considered the combined impact: the reputation incentives of lead independent directors. This study integrates these emerging streams of research to investigate whether the reputation incentives of lead independent directors affect audit fees. We find that firms with a lead independent director who has relatively low reputation incentives are associated with audit fees that are 4.39% higher than firms with a lead independent director who has neutral reputation incentives, consistent with auditors viewing these firms as riskier. We also find that this association is driven by auditors who are not industry specialists. Our results continue to hold when using an entropy balancing approach and when conducting other robustness tests. [ABSTRACT FROM AUTHOR]

This paper examines the effect of environmental policy stringency (EPS) on audit pricing. By exploiting the exogenous variation in environmental policies across 26 countries, we find that firms in countries with more stringent environmental policies incur lower audit fees. The inverse association is more pronounced in common law countries, in countries with a higher level of public enforcement of regulations and in countries with more investor protection. The lower audit fees are also more prominent for firms that are followed by more analysts and firms that have a greater institutional ownership. Furthermore, we find that firms in countries with strong regulations are better and more innovative at managing environmental risk, which implies that better environmental performance of the firms following stronger regulations could lower business risks and thus decrease audit fees. Overall, our findings suggest that compliant firms benefit from EPS. [ABSTRACT FROM AUTHOR]

We investigate the impact of audit client political contributions on various audit attributes. We find that, despite having poorer accruals quality, clients with higher political contributions have fewer restatements, receive no more going concern qualified opinions and receive fewer reported material weaknesses. Additionally, we find that auditors earn higher fees from and have longer tenure with their politically connected clients. Our evidence is indirect, but the totality of our results is most consistent with an economic bond between auditors and their politically connected clients, whereby clients are allowed more accounting discretion and receive fewer adverse audit outcomes, and the auditor charges a persistent risk premium. We conclude that client political connections likely influence audit outcomes because of either reduced scrutiny from regulators or direct influence on auditors. We extend a growing body of research on the consequences of corporate political connections. [ABSTRACT FROM AUTHOR]

Purpose: This paper aims to examine how a firm's exposure to economic policy uncertainty affects the auditors' perceptions of financial reporting risk. Firms that are more sensitive to policy uncertainty are predicted to engage in more earnings management because these firms are more likely to experience greater uncertainty in future operations. Audit fees will reflect this reporting risk. On the other hand, auditors might feel more fee pressure from policy-sensitive firms because firms are more inclined to reduce spending in the face of uncertainty and subsequently charge lower fees. Design/methodology/approach: The author tests my hypothesis using U.S. data on audit fees and client characteristics of public companies between the years 2001 and 2021. The author estimates a standard audit fee model based on the audit fee literature (Hay et al., 2006) while also including the two policy sensitivity measures. This study uses panel data methods that allow time-series analyses, providing a powerful setting to test dynamic audit fee adjustment to improve the understanding of the audit market. Findings: The results suggest that audit fee is higher for policy-sensitive firms than for policy-neutral firms. These results are robust to various proxies of policy sensitivity and various specifications designed to mitigate the endogeneity concerns. The study provides assurance that on average, auditor pricing reflects client risk adequately, mitigating the concern that auditors give in to fee pressure and compromise audit quality as a result. Research limitations/implications: While the findings from this study should be of value to regulators and academics seeking to understand audit activities amid escalating macroeconomic uncertainty, when interpreting these results, several limitations must be considered. The study does not examine how external auditors evaluate risks tied to policy uncertainty. A comprehensive understanding of how and why external auditors respond to heightened policy uncertainty faced by firms could be better achieved through interviews with external auditors and audit committee members. In addition, while this study posits that auditors adjust their approach in response to changes in policy uncertainty, largely due to potential shifts in the risks of material misstatement, there might be additional factors at play that warrant higher audit fees post a change in policy uncertainty. For instance, specific policy changes may give rise to new risks or modify existing ones, thereby precipitating increased scrutiny of records and procedures as company directors' demand. These aspects offer potential avenues for future research. Practical implications: This study underscores the significant role of policy sensitivity in determining audit fees and audit quality. Policy-sensitive firms present unique complexities and potential risks that require additional effort and vigilance from auditors. Auditors must develop a specialized understanding of sectors prone to policy fluctuations to navigate these unique challenges effectively. In addition, the role of professional standards boards and regulators in establishing guidelines for auditing policy-sensitive firms cannot be understated. Such guidelines could lead to more consistent audit practices and improved audit quality. Finally, by recognizing and effectively responding to the policy sensitivity of client firms, audit firms can mitigate their own risks, strengthen public trust and enhance the reliability of financial reports. Originality/value: First, this study adds to an emerging stream of auditing literature that focuses on how audit fees interact with a firm's external environment by providing evidence of an unexplored implication, a firm-specific policy sensitivity. Second, my main construct, policy sensitivity, provides two distinct advantages over other variables used in prior studies that explore the relationship between audit fees and external firm environments. Third, this study answers the calls for research by De Villiers et al. (2013, p. 3), who identified the cost behavior of audit fees, especially over time, as an area not well understood. [ABSTRACT FROM AUTHOR]

The digital transformation of enterprises has brought great changes to the audit service demand of enterprises and the audit service supply of auditors. Therefore, there is a pressing need to study the digital transformation of enterprises and its impact on auditor switch. This paper aims to explore the influence of enterprise digital transformation on auditor switch and its potential implications for improving auditor efficiency. Using Python's machine learning tools and text analysis methods, This paper measure the digital transformation of Chinese listed companies and study the impact of digital transformation on the frequency of auditors witches. Our findings suggest that companies that have undergone digital transformation have reduced the frequency of changing auditors by alleviating information asymmetry, enhancing the effectiveness of companies' internal controls and increasing audit fees. This unique measurement mode of digital transformation provides new evidence for the relationship between the audit service demand of enterprises and the audit service supply of auditors under the digital transformation environment. The research can assist businesses in understanding how digital transformation affects auditing professionally and in improving their audit processes accordingly. [ABSTRACT FROM AUTHOR]

The purpose of the current study was to investigate the effect of litigation risk and good corporate governance on fees audit and also to see the effect of the level of financial reporting disclosed as a moderating variable of the manufacturing companies listed on the Indonesian Stock Exchange by using index litigation for litigation risk variable, for GCG variable by using index GCG, and audit fee by using natural logarithm, and also the level of financial reporting disclosure by using the Index Wallace. The research object as a sample is 165 manufacturing companies listed on the Indonesia Stock Exchange for the period 2017 to 2019. The research method uses a panel data regression model to test the research hypothesis. The empirical findings of the study prove that litigation risk positively affects audit fees, while good corporate governance has no effect. The level of financial reporting disclosure which acts as a moderating variable is not able to explain audit fees through litigation risk and good corporate governance. The results of the study imply that the management of litigation risk is important for the company to pay attention to prevent large audit fees. [ABSTRACT FROM AUTHOR]

Purpose: The literature on the influence of audit committees (AC) and cosmetic accounting (CA) is scarce. AC plays a unique and vital role in boosting earnings reliability in countries with weaker application of accounting standards or weaker legal protection for investors. AC, therefore, are considered to be one of the essential tools available to directors in supervising management decisions regarding financial reporting. This paper aims to examine the influence of AC characteristics (ACC) on CA and how this relationship is moderated by the audit fee. Design/methodology/approach: This study used probit regression to analyze 1,218 firm-year observations of listed companies in Tehran Stock Exchange from 2014 to 2020. Findings: The results show that AC financial accounting expertise, AC independence, female AC membership and AC tenure were negatively related to CA. The negative relationship is highly pronounced when a firm incurs higher audit fees, and audit fees moderate the relationship between ACC and CA. Results for the robustness checks show that only AC independence was significant, and the results of other characteristics were not significant. Research limitations/implications: This research was conducted in an Iranian setting where the formation of ACs is on the verge of regulation; therefore, the data used for the study only contains the seven-year period of ACs' statutory activity. In addition, a lack of consensus on the precise measures of an AC's effectiveness could be considered as a restrictive factor. Originality/value: The findings provide an initial insight into the effect AC on CA and moderating effect of audit fee on the relationship between ACC and CA. [ABSTRACT FROM AUTHOR]

Past business ethics research highlights negative perceptions about corporate governance of family firms, and yet many auditors evaluate family businesses favorably and charge them lower audit fees; however, this inconsistency remains unexplained. Moreover, the impact of family firms' political connections and board gender diversity on audit fees is still not clear. Based on the data from listed Chinese family firms, we address these important research gaps by using the local institutional environment in which the client operates as a moderator of the process by which auditors assess the implications of clients' political connections. Political connections reduce audit fees when a client is located in a region with high-quality public administration. Female representation in audit committees positively moderates the relationship between political connections and audit fees, as female committee members react to their firms' political connections by demanding higher levels of assurance from auditors. Female committee members also demand higher audit efforts for family firms managed by non–family-member CEOs. [ABSTRACT FROM AUTHOR]

Synopsis The research problem We examine whether small audit firms adopt niche strategies to compete in the public company audit market. To that end, we focus on auditors servicing clients from one industry only (which we label as a nationwide single-industry focus) and test its association with audit quality and pricing. Motivation Prior research on auditor competition has mainly focused on the large (mainly Big Four) audit firms. While large and small audit firm markets are two distinct markets, little is known about competitive strategies of small audit firms in the public company audit market. The test hypotheses Our first hypothesis is that small audit firms adopting a single-industry focused strategy supply higher audit quality compared with audit firms that do not adopt a single-industry focused strategy or a simple industry specialization strategy, ceteris paribus. Our second hypothesis is that small audit firms adopting a single-industry focused strategy engage in discount pricing compared with audit firms that do not adopt a single-industry focused strategy or a simple industry specialization strategy, ceteris paribus. Target population The U.S. commercial banking sector covering the period 2004–2020. Adopted methodology Multivariate analyses adopting linear and probit models. Analyses To test our first hypothesis, we run a bank audit quality model using loan loss provisions as the dependent variable for our main analyses. Subsequent analyses adopt restatement, going concern, and internal control weaknesses models. To test our second hypothesis, we rely on a bank audit fee model. All models include relevant controls established in previous research and those for self-selection. Findings The evidence suggests that small audit firms adopting a nationwide single-industry focus are able to provide higher audit quality (compared with other rivals, even industry specialists) while at the same time charging lower audit fees implying cost efficiencies that are passed on to the client due to their focused expertise. [ABSTRACT FROM AUTHOR]

We study off-the-clock indiscretion accusations against corporate officers and directors and examine the extent, effectiveness, and context of auditors' response. In the year that indiscretion allegations are first publicized, auditors charge higher fees and are more likely to resign. Auditors respond to allegations against both top executives and board members. Further, reactions are strongest when allegations demonstrate a lack of individual integrity and, separately, when the audit office has previously audited other similarly accused clients. Importantly, the resulting increase in auditors' effort partially negates the association between indiscretions and lower financial reporting quality. However, auditors are primarily reactive, rather than proactive, and their response is stronger when the accused client is less important economically. These results suggest that company leadership's off-the-clock indiscretions are signals to auditors of poor tone at the top, but the audit response is not uniform across all clients. [ABSTRACT FROM AUTHOR]

Using data for 2016–2021 on a sample of Chinese non‐financial firms, this study documents a positive association between the use of hedge accounting and audit fees and finds that the new requirements under International Financial Reporting Standards 9 (IFRS 9) help mitigate this positive relationship. Channel analyses show that the new hedge accounting requirements mitigate earnings volatility and accruals management, which results in audit fee reductions. Further, the post‐IFRS 9 audit fee decrease is greater among large audit firms, firms in regions with higher marketisation levels and firms with better corporate governance. [ABSTRACT FROM AUTHOR]

This study examines the effect of changes to the 2015 UK charities accounting standards on financial reporting timeliness and audit fees. Utilising 62,785 observations (9351 charities) from 2010 to 2017, we report a significant decrease in financial reporting timeliness following the new accounting standards regime. The decrease is more pronounced in charities with audited financial statements because of their lengthier audit report lag. Audit fees are also substantially higher following the new accounting standards implementation. Sensitivity tests reveal charities are more likely to have an unusual reporting lag following the introduction of the new accounting standards. [ABSTRACT FROM AUTHOR]