Search

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 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]

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]

Executive compensation contracts may influence financial reporting quality, and the CFO plays a key role in preparing the financial statements. This study examines whether the structure and components of CFO compensation are associated with audit risk as measured by audit fees for a sample of S&P 1500 companies during the period 2012–2022. We find that the percentage of total compensation composed of either stock or options is significant and positively related to audit fees, while non-equity incentive plan compensation is significant and negatively related to audit fees. We also find that the dollar amount of equity compensation is significant and positively related to audit fees, while the dollar amount of non-equity compensation is not related to audit fees. These results suggest that CFO compensation structure is an important factor in the assessment of audit risk, which is important for compensation committees as well as regulators. This is the first study, to our knowledge, that examines the relationship between the dollar amount and composition of CFO compensation and audit fees. [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]

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]

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]

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]

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]

Using a large international sample, the author investigated the effects of economic policy uncertainty (EPU) on financial reporting quality (FRQ) and audit (AF). For this analysis, he used the Baker et al. (2016) EPU index and find a negative association between EPU and FRQ. Furthermore, that this impact was found to be more pronounced for firms operating in sensitive industries and less pronounced for firms that report under the International Financial Reporting Standards (IFRS). However, for firms operating in sensitive industries, reporting under IFRS does not weaken the impact of EPU on FRQ. The results also showed that the EPU is negatively associated with audit fees. Furthermore, the interaction term between IFRS and the EPU is positively associated with AF while the interaction term between the EPU and firms operating in sensitive industries is negative. The present study has important implications for policymakers, investors, auditors, and capital markets, as it provides strong evidence of the impact of the EPU on FRQ and AF. In addition, it enriches the literature by examining the influence of IFRS and industry characteristics on the interaction between EPU, FRQ, and AF.

This empirical study examines the impact of auditor attributes and firm size on financial reporting timeliness among listed firms in Nigeria. The study employs an ex-post facto type of research, with a quantitative design covering a ten-year period (2013–2022). The sample size comprises sixty-six (66) non-financial firms listed on the Nigerian Exchange Group (NGX). Based on data extracted from the audited annual reports of the sampled sixty-six firms, the robust regression model results reveal that joint audits contributed considerably to shorter financial reporting lags, underscoring the value of collaborative audit efforts in streamlining the audit process. Audit fees maintained a positive significant effect on the reporting lag of listed Nigerian firms. However, audit switch, client firm size, audit opinion, and audit firm size all maintained insignificant effects on the financial reporting timeliness of the Nigerian listed firms investigated. Therefore, the study recommends that listed firms should rather opt for affordable joint audits due to their efficiency in streamlining the audit process. Equally, the study recommends that listed firms should maintain long-term relationships with auditors to leverage increased familiarity, yet remain cautious of likely complacency and breach of auditing ethical guidelines that can arise from prolonged engagements.

We investigate the coinciding effects of the implementation of Auditing Standard No. 5 (AS5), the change in the Public Company Accounting Oversight Board's (PCAOB) inspection regime, and the Great Recession on the audit fees and audit quality of accelerated filers. AS5 took effect in November 2007 and promulgated a top-down, risk-based audit approach to SOX 404(b) audits of accelerated filers. Concurrently, the PCAOB adopted a stricter approach to its inspections of audit firms, which encouraged them to improve audit quality and reduce audit fees. Moreover, the Great Recession pressured audit firms to reduce fees. We find that, following the three events, audit fees decreased and quality increased for accelerated filers. We also find that audit fees and audit quality increased for non-accelerated filers, although these filers were not directly affected by AS5. [ABSTRACT FROM AUTHOR]

Drawing on prior literature on audit fees, client reputation, and corporate governance, we posit that a material adverse event at a firm, such as a financial fraud allegation, leads to an increase in the audit fees of firms connected to the former by a board interlock. We propose two possible mechanisms to explain the upward pressure on audit fees: a client-side effect, where the client demands additional audit services, and an auditor-side effect, where the auditor raises its audit fees due to a perceived increase in audit engagement risk. The results indicate an average marginal increase of 12.86% in audit fees in the year following the public revelation of financial fraud. Additional analyses suggest that an auditor-side effect is in place, while we cannot find clear evidence supporting the client-side effect. Furthermore, we document that the positive effect on audit fees persists for up to at least 2 years after public disclosure of the event when the interlocked director serves as a member of the audit committee. JEL Descriptors: G34, M40, M42 [ABSTRACT FROM AUTHOR]

Purpose – Financial statement fraud has become a global concern, and auditors are increasingly focused on identifying and investigating it. Auditors may play a crucial role in investigating and reducing financial statement fraud, and this is particularly important in developing countries where fraudulent practices are more prevalent due to the lack of strict regulations and oversight. This study investigates whether enhanced audit quality has an impact on reducing financial statement fraud. The primary aim is to recognize whether a higher level of audit quality relates with a decrease in fraudulent activities in Indonesia, which is one such country that has not yet adopted IFRS. Design/methodology/approach – This study investigates the effect of audit quality, as measured by audit tenure, audit fee, and audit size, on the dependent variable of financial statement fraud, as indicated by Dechow F-value. The sample for this study comprises 951 observations from 2015 to 2020, and the research design utilizes a panel data approach. To test the main hypothesis, OLS, and GMM estimation techniques are employed. Findings – The analyses reveal a negative relationship between audit tenure and financial statement fraud. This suggests that shorter audit tenure may be associated with an increased risk of financial statement fraud. This heightened risk could stem from auditors having limited time to thoroughly understand the company's operations and internal controls, potentially making it more challenging to detect and prevent fraudulent activities perpetrated by the client. Conversely, a positive relationship is identified between audit fees and financial statement fraud, suggesting that companies paying higher fees may be engaging auditors less adept at detecting fraudulent activities. Furthermore, a negative relationship is observed between Big-5 and financial statement fraud, which may be due to the greater resources, expertise, quality control, scrutiny, reputation, and ethical conduct of Big-5 audit companies. Research limitations/implications – This study only focused on listed companies in Indonesia, therefore, caution should be exercised when generalizing the findings to other developing and Muslim countries such as Malaysia. The findings may differ due to the adoption of IFRS in Malaysia. As such, it is important for future studies to include Malaysia as a sample and compare the results with those of Indonesia. This comparison would demonstrate the impact of IFRS adoption on the relationship between audit quality and financial statement fraud and provide insights for policy makers in Indonesia. Practical implications – The findings of this study have important implications for developing countries that have been shown to be more susceptible to fraud than developed countries. This study contributes to the existing research on the role of audit quality in reducing financial statement fraud and emphasizes the need for auditors and accountants to take a proactive approach in detecting and investigating financial fraud. Originality/value – This study is a new study because it investigates the relationship between audit quality and financial statement fraud in Indonesia, a developing Muslim country that has not yet adopted International Financial Reporting Standards (IFRS). The study provides valuable evidence on the unique factors that influence fraud in Indonesia and fills a gap in the literature as previous studies on this topic have largely focused on developed countries. Additionally, the study recommends that policymakers in Indonesia consider implementing IFRS to improve the reliability of financial reporting and strengthen the effectiveness of the auditing process, thus reducing the incidence of fraud.

Abstract This study intends to examine the impact of internal control of non-financial reporting-related weakness on the audit fees of corporations. To pursue the research objectives, two research questions are formalized: (i) How does internal control over non-financial reporting-related weakness (ICW N-FR ) affect audit fees (ADF)?; (ii) What is the effect of external audit size on the link between ICW N-FR and ADF ?. Multiple regression models with 82 listed Jordanian companies from 2014 to 2020 used as the study sample reveal the following findings. Our findings underscore the importance of considering the characteristics of the audit firm when analyzing the relationship between ICW N-FR and audit fees. Companies audited by Big 4 firms may face greater scrutiny and potentially higher fees for ICW N-FR compared to those audited by non-Big 4 firms. While prior studies have explored various factors influencing audit fees and the impact of internal controls on audit costs, this research uniquely delves into the differential effects observed when companies are audited by different categories of audit firms. The study accentuates the significance of impeccable internal controls within non-financial reporting procedures and their far-reaching consequences on audit fees, thereby highlighting the imperative for corporations to give precedence to augmenting their internal control mechanisms.

This study explores how auditors' emotions, specifically negative moods triggered by flight delays, impact auditing quality. Utilizing flight delays during audit assignments as a mood indicator, weather conditions at departure airports serve as an instrumental variable to provide a robustness check between flight delays and audit outcomes, employing a two-stage least squares model. The findings suggest that such negative moods improve auditing effort and quality, as evidenced by reduced future accounting restatements and increased audit fees. The positive effect of flight delays on auditing quality is consistent across different tests and measures. This study highlights the significance of auditors' emotional states on their professional performance, indicating a unique angle on auditing quality research by focusing on the emotional well-being of auditors as influenced by external factors such as flight delays.

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]

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]

Purpose: Climate change has led to a rise in the frequency, intensity and scope of droughts, posing significant implications for businesses. This study examines the impact of local community drought levels on audit pricing. Additionally, it explores the moderating effects of high-tech industries, auditor busyness and the level of local community concern regarding the drought crisis. Design/methodology/approach: This study employs a mixed-methods approach to rigorously test the research hypotheses. The quantitative phase of the study utilizes a sample of 1,278 firm-year observations from Iran's capital market. For the analysis of the quantitative data, ordinary least squares regression with clustered robust standard errors is used. Additionally, this research supplements its quantitative findings with qualitative evidence obtained through semi-structured interviews with 19 Iranian audit partners. Findings: The results suggest that firms operating in provinces facing severe droughts experience notably higher audit fees. Furthermore, the positive relationship between drought and audit fees is weakened when auditors are busy, local community concern regarding the drought crisis is high or the firm operates within high-tech industries. These findings are supported by a range of robustness checks and qualitative evidence gathered from the field. Originality/value: This research contributes to the growing literature on climate change by examining the influence of local community drought levels on audit pricing within an Iranian context. Additionally, our study sheds light on how high-tech industries, auditor workload and the level of local community concern regarding the drought crisis moderate the relationship between drought and audit fees. Importantly, our study pioneers in providing mixed-methods evidence of the association between drought severity and audit fees. [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]

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]

This study intends to examine the impact of internal control of non-financial reporting-related weakness on the audit fees of corporations. To pursue the research objectives, two research questions are formalized: (i) How does internal control over non-financial reporting-related weakness (ICWN-FR) affect audit fees (ADF)?; (ii) What is the effect of external audit size on the link between ICWN-FR and ADF ?. Multiple regression models with 82 listed Jordanian companies from 2014 to 2020 used as the study sample reveal the following findings. Our findings underscore the importance of considering the characteristics of the audit firm when analyzing the relationship between ICWN-FR and audit fees. Companies audited by Big 4 firms may face greater scrutiny and potentially higher fees for ICWN-FR compared to those audited by non-Big 4 firms. While prior studies have explored various factors influencing audit fees and the impact of internal controls on audit costs, this research uniquely delves into the differential effects observed when companies are audited by different categories of audit firms. The study accentuates the significance of impeccable internal controls within non-financial reporting procedures and their far-reaching consequences on audit fees, thereby highlighting the imperative for corporations to give precedence to augmenting their internal control mechanisms. [ABSTRACT FROM AUTHOR]

PurposeMotivationDesign/Methodology/ApproachMain findingsPractical implicationsNovelty/ContributionThe main objective of this study is to analyse the impact of auditor gender on audit fees, with a view to establishing whether there are any differences in audit price depending on the gender of the auditor.The existence of a gender gap in audit fees is a problem. In order to try to reduce this gap, it is necessary to understand the determinants of audit fees according to gender.The sample under analysis is made up of 3217 unlisted Spanish companies. In order to fulfil our aim, an audit fee model is put forward, applying a multiple linear regression analysis differentiated by auditor gender.The results point to an absence of any statistically significant association between audit fees and auditor gender. In contrast to other countries within the same context, Spanish female audit partners do not generate higher audit fees than their male counterparts; there is no female audit fee premium as there seems to be in other countries such as Belgium, France, Finland, China or the USA.Differences were found among the factors which determine audit fees; there tend to be fewer factors considered in audits signed by female auditors, with indicators related to the economic and financial situation of the company under audit excluded from the fees model. These results could be justified by differences between male and female auditors with respect to audit planning and efficiency.This paper is a contribution to the literature on gender in auditing, and offers up evidence on the impact of auditor gender on audit fees within a specific context that has not been studied in any depth, namely the Spanish auditing market for unlisted companies. [ABSTRACT FROM AUTHOR]

SUMMARY: We examine auditor communication provisions (ACPs) in private loan agreements, which are private contracting mechanisms establishing communication between lenders and their borrowers' auditors. We provide evidence that lenders value auditor communications and often specify different types of ACPs that facilitate lender monitoring. With predictable variation across the different ACP types, ACPs are associated with larger loans, longer maturities, larger loan syndicates, more financial covenants, and greater slack in financial covenants. In examining audit effort implications for borrowers, we find that ACPs are associated with higher audit fees and longer audit report lags. This is consistent with auditors responding to the litigation risk ACPs impose. In samples where the risk of third-party litigation is greater, the association between ACPs and audit effort proxies is heightened, suggesting the increased litigation risk brought about by ACPs interacts with other audit client-specific risk factors. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: M42; D82; G21; G30; K40. [ABSTRACT FROM AUTHOR]

Copyright of Financial & Business Studies Journal / Maǧallaẗ Al-Dirāsāt Al-Māliyyaẗ wa Al-Tiǧāriyyaẗ is the property of Beni Suef University 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.)

Our study finds that relative to firms managed by local CEOs, firms managed by CEOs who have returned from overseas (returnee CEOs) exhibit significantly higher audit fees. We also find this positive association to be stronger for returnee CEOs who manage firms with greater agency problems, have overseas experience in countries with better developed institutions, or have greater business knowledge. Further analyses indicate that firms managed by returnee CEOs tend to exhibit better financial reporting quality, lower propensities for financial fraud, and fewer earnings restatements in subsequent years. In addition, firms managed by returnee CEOs are associated with greater internationalization and higher propensities for seasoned equity offerings (SEOs) than firms managed by local CEOs. Overall, our findings are most consistent with the conjecture that returnees tend to bring ethics and practices that ensure higher financial reporting quality back to their home countries. Our findings offer a plausible explanation that returnee talents could increase firm value. [ABSTRACT FROM AUTHOR]

This research aims to analyze the relationship or influence between audit fees, investment opportunity set and corporate governance on the integrity of financial reports. The population in this research is all companies in the infrastructure, utilities and transportation sectors listed on the Indonesia Stock Exchange during the 2018 - 2022 period. The sampling technique used was purposive sampling, so that the number of samples that met the criteria was 35 companies in the infrastructure, utilities and transportation sectors. The data analysis technique in this research is panel data regression analysis with quantitative descriptive analysis using secondary data. The data in this research were processed using Eviews 12 and Microsoft Excel 2016 software. From the results of data processing in this research, it was found that the audit fee variable has an effect on the integrity of financial reports, investment opportunity set has no effect on the integrity of financial reports, institutional ownership has an effect on the integrity of financial reports, managerial ownership has an effect on the integrity of financial reports, and independent commissioners have an effect on the integrity of financial reports. integrity of financial reports. [ABSTRACT FROM AUTHOR]

With the popularization and rapid development of various core financial technologies, traditional financial service companies are facing the challenge of accelerated integration into the financial digital transformation. The digitalization of business in the financial industry not only increases the cost of corporate governance, such as risk control management and technology supervision, but also poses a major challenge to audit firms responsible for external compliance audits, such as that to the International Standards on Auditing. This study explores the impact of financial digitalization on accounting firms' industry specialist features and audit fees using a sample of financial industry in Taiwan. The evidence supports the conclusion that the relationship between audit fees and financial industry specialist audit firms is positive, bill it also shows a negative relationship with the Tech- Fin industry specialist audit firm. Particularly, this study finds a positive and significant relationship between audit fees and both financial and TechFin industry specialist audit firms, which demonstrates the knowledge spillover effect of audits. Finally, this study fills the gap in the literature on the relationship between industry specialist audit firms and audit fees in the financial industry and provides a new direction for the future development of financial technology specialists in the audit market. [ABSTRACT FROM AUTHOR]

his study investigates the influence of audit committee accounting background on audit fees paid by companies to external auditors. To achieve this objective, the study utilizes archival method of data collection using market capitalization to select the Top 100 companies listed on Bursa Malaysia utilizing their 2015’s annual report. To investigate the influence of audit committee accounting background, the study utilizes ordinary least square regression analysis. The result indicates that audit committee accounting background has significant positive relationship with audit fees. Similarly, the result indicates that the relationship between audit committee accounting’s experience and audit fees is positive and significant on the other hand, the study displays a negative and insignificant relationship between accounting background of audit committee chairman and audit fees. Further test was conducted to investigate the effect of professional qualification, auditing the background of audit committee chairman and audit committee on audit fees. The result discovers a significant negative relationship between auditing background of audit committee chairman and audit fees. However, a significant positive relationship is found between the audit committee auditing background and as well as the audit committee professional qualification and the auditees. Thus, the study proposes to the authority the roles of accounting and auditing expertise of audit committee members on the external auditors ‘works. [ABSTRACT FROM AUTHOR]

Using a Supreme Court ruling that rejected the use of "bright-line" rules previously relied upon in evaluating materiality claims, this study examines how heightened materiality uncertainty impacts audit pricing. We expect the heightened uncertainty to make it more difficult for auditors and clients to assess materiality and to reach a consensus on materiality assessment, which increases audit effort and engagement risk, leading to higher audit fees. Consistent with this prediction, we find that after the ruling, audit fees increase significantly for treatment firms in the circuits using bright-line rules in the pre-ruling period, relative to control firms not affected by the ruling. This effect is stronger when auditors have lower quality or lower industry expertise, and when investors have more diverse opinions. We also find that for firms audited by low-expertise auditors, auditor turnover due to auditor-client disagreement on materiality-related issues increases significantly for treatment firms relative to control firms. Data Availability: Data are available from the public sources cited in the text. JEL Classifications: K2; M41; M42. [ABSTRACT FROM AUTHOR]

We examine the audit pricing consequences of auditor inspections under the public oversight regime in the EU. Employing a staggered differences-in-differences design, we document an inspections audit fee increase during the post-inspection period when companies' auditors are subject to inspections by the national Public Oversight Body (POB). However, this effect masks significant cross-sectional variation. Specifically, we find that the increase in audit fees attributable to inspections is concentrated among POBs with more adequate human resources, where inspections last longer or occur both at the auditor's and the regulator's premises. Also, the effect of inspections on audit fees is evident only when the POB prohibits inspectors from joining an audit firm immediately after their departure or when the oversight system is funded by multiple stakeholders. Overall, our findings suggest that audit costs as reflected in audit fees increase for clients of inspected auditors but only when inspections are more laborious, independent, and rigorous. [ABSTRACT FROM AUTHOR]

In this study, we investigate whether auditors consider their clients' climate change-related external risks when making audit pricing decisions. Using county-level proxies based on the number of declared natural disasters and the level of societal climate change awareness, we discover that clients with greater exposure to climate change risks pay significantly higher audit fees. After performing several additional tests, we conclude that auditors consider climate change risks and their potential consequences as a systematic business risk that is factored into the audit fees. For instance, we demonstrate that clients' climate risk exposure has become more strongly associated with audit pricing in recent years, as climate change has gained greater importance in public debate. Moreover, we discover that auditors place a greater emphasis on clients' climate risks when they themselves are located in regions with higher climate change awareness, indicating that auditors' climate change perception also matters. Given the growing interest in climate change-related risks in practice and research, as well as the significance expected to be placed on these risks in the future, our findings are timely and should appeal to a wide range of readers, including investors, regulators, and scholars. [ABSTRACT FROM AUTHOR]

We examine the impact of product recalls on audit production. Product recalls are events that increase engagement risk associated with greater audit effort, and by extension, greater audit quality. Consistent with this conclusion, we find firm-years with a product recall have a lower likelihood of being subsequently restated and lower levels of accrual error. While a positive association generally exists between audit effort and audit fees, prior literature shows firms experiencing economic stress negotiate lower audit fees and auditors accept lower fees to earn future returns. We expect that to increase the likelihood of retaining a client, auditors will agree to lower fees when the short-term economic stress associated with a recall injects downward pressure into fee negotiations. Supporting this conclusion, we find product recalls are associated with lower audit fees – a relation attributable to differing magnitudes of temporal fee increase. We also show the effects are transitory, the higher levels of audit quality are attributable to specialist audit offices, and the lower levels of fees are attributable to engagements where the client has greater bargaining power. While a positive association typically exists between audit effort and audit fees, our paper identifies a firm-specific event that weakens this relation. [ABSTRACT FROM AUTHOR]

We examine whether big baths (large and non‐recurring charges) affect auditors' risk assessments and therefore result in higher audit fees. Prior studies have found that there is an asymmetric reaction from auditors on firms' income‐increasing/decreasing accruals. We argue that auditors' response to big baths is distinguishable from other types of earnings management as big baths provide incremental information to auditors beyond other earnings manipulation indicators. Our findings show that audit fees are significantly higher for firms with big baths, compared to other firms. We also present evidence that the positive relation between big baths and audit fees is stronger for firms with weaker corporate governance and greater information asymmetry. Overall, our results suggest that auditors expand their audit effort to mitigate the greater audit risk attributable to big baths, which in turn lead to higher audit fees. [ABSTRACT FROM AUTHOR]

An ongoing debate revolves around instruments for enhancing the audit quality perceptions of financial statements users. Therefore, we investigate two measures that lack empirical evidence, but could theoretically improve perceived audit quality. These are a nonprovision of NAS (either by pure audit firms, or a nonprovision of NAS to audit clients) and a statutory fee schedule. We conduct an experiment with German bankers and nonprofessional investors. The results indicate that a nonprovision of NAS to audit and to all clients (i.e., pure audit case) increases perceived audit quality only if the audit firm sets audit fees internally. Moreover, a statutory fee schedule only increases perceptions of audit quality in the case of a simultaneous provision of audit services and NAS. Consequently, instead of full-banning NAS, an alternative approach would be to introduce a statutory fee schedule that would still permit the provision of NAS while adhering to existing caps. JEL Classifications: M42; M48. [ABSTRACT FROM AUTHOR]

The moderating effect of going concern on the influence of audit attributes on the financial reporting quality of listed Nigerian banks was examined in this study. An ex-post facto research design was employed on a population consisting of 23 banks. 13 banks were purposively selected for a period 10 years ranging from 2013-2022. Data used for this study was analyzed using descriptive statistics and structural equation modeling. Audit attributes was proxy with audit fees, audit specialization, audit independence, and audit size while financial reporting quality was measured with discretionary accrual. Going concern was used as the moderating variable. Auditors’ opinion was used to measure going concern. The outcome of the analysis discovered that going concern (β = 0.878, p > 0.634) at 5% level of significance has a positive but insignificant effect on financial reporting quality whereas going concern (β = 0.052, p < 0.028) at 5% level of significance has a positive and significant effect on audit attributes of deposit money banks in Nigeria. Also, all the audit attributes used in this study have a positive and significant effect on financial reporting quality except for audit specialization which has an insignificant relationship with financial reporting quality. The study concluded that audit attributes have a significant effect on financial reporting quality and that going concern has a moderating effect on audit attributes and financial reporting quality. The study recommends that banks should ensure that their going concern ability is being assessed by the external auditor to guarantee the survival of the banks and gain the trust of the investors and shareholders.