Abstract
We examine the impact of informal cultural attributes, such as generalized trust in a society (hereafter “trust”) and civic cooperation, on audit fees and Big N presence in country-specific audit markets. The relation between trust (civic cooperation) and audit fees/Big N presence is ambiguous. On one hand, higher trust and civic cooperation are associated with lower levels of agency problems, thereby reducing the demand and price of audit services. On the other hand, higher trust (civic cooperation) societies may place more value on a strong audit function due to higher societal costs of inappropriate behavior, resulting in a relatively higher demand and cost of audit services. We find that the presence of Big N auditors is stronger in countries with higher levels of civic cooperation, and that audit fees are higher in countries with higher trust and civic cooperation. The positive impact of societal trust and civic cooperation on audit fees and Big N presence is weakened in countries with stronger levels of investor protection. These results suggest that both formal and informal institutions can act as substitutes in determining the demand and supply for audit services.
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Disclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.