Audit Fees Research Articles

Analysis of the Impact of Enterprise Digital-Intelligent Transformation on Audit Fees

In todays digital era, enterprises are accelerating their digital-intelligent transformation processes to enhance competitiveness and operational efficiency. This paper employs theoretical analysis and case studies to examine the specific impact of digital-intelligent transformation on audit fees. The findings reveal that such transformation can reduce audit fees by improving information transparency, optimizing business processes, and mitigating audit risks. Using China Mobile and Haier Smart Home as examples, the study identifies three mechanisms through which different transformation measures affect audit fees: efficiency enhancement and burden reduction, quality improvement and empowerment, and precise risk prevention and control. These findings offer new insights into cost reduction and efficiency optimization for enterprises, helping to streamline cost structures and providing valuable guidance for the audit industrys transformation and upgrade in the digital-intelligent era.

Audit pricing of restatement severity in the announcement year: the moderating effects of client management changes and specialist auditors

Purpose This paper aims to examine the audit pricing of restatement severity in the year of restatement announcement and how client management changes and auditor industry specialization moderate such pricing for a sample of restating firms. Design/methodology/approach The sample consists of restating firms without auditor changes in the year of restatement announcement in the USA from 2005 to 2020. Restatement severity is measured by nine measures, which are further grouped into four categories. An audit fee model is used to investigate whether audit fees are higher for more severe restatements. Interaction terms involving the four categories of severity measures and a dummy variable for top management changes and for industry specialists are used to study the moderating effects. Findings This paper reports that audit fees are higher for more severe restatements (those that are more serious in nature, pervasive, unfavourable in financial impact and relevant to auditors) and even higher for clients with top management changes. However, audit fees are not always higher for specialist auditors. The results show that, for auditors who are specialists, audit fees are higher for restatements that are more serious in nature but lower for those that are more pervasive. Originality/value Prior studies examine audit pricing of restatement or restatement severity one or two years after restatement announcement. In contrast, this paper studies audit pricing of restatement severity in the year of restatement announcement because clients and auditors are likely to renegotiate audit fees for restatement as early as possible and if the pricing issue is studied after the announcement year, noisy results may be obtained due to factors arising solely after that year. Also, in contrast to prior studies that do not investigate the moderating effects of clients’ and auditors’ characteristics on the pricing issue, this paper studies the effects of client management changes and auditor industry specialization on the issue and, thus, recognizes the contextual nature of the issue.

Determinants of Auditor Choice: Evidence from Sharia Commercial Banks in Indonesia

This research aims to determine the impact of corporate governance, firm complexity, foreign ownership, and ownership concentration towards auditor choice for Sharia commercial banks in Indonesia in 2016-2023. Firm size is also accounted for as a control variable. This research was conducted using a quantitative approach using the logit logistic regression analysis method through the Eviews 13 software. The sampling method was carried out using a purposive sampling method, which produced a sample of 9 Sharia commercial banks in Indonesia with a total of 72 observations. This study aims to provide an overview of the factors that Sharia commercial banks in Indonesia consider in choosing their external auditors, namely between Big 4 and non-Big Four auditors, which differ from other companies and industries. The results show that in partial analysis, corporate governance mechanisms and ownership concentration significantly and negatively affect auditor choice. Meanwhile, firm complexity and foreign ownership do not affect auditor choice. Low demands cause the negative influence of ownership concentration due to the private nature of the banks and efforts to achieve efficiency in audit fees while maintaining the same quality standards.

Are auditors insulated to positive client news? Evidence from audit fees and going‐concern opinions

AbstractThis paper investigates if and how auditors consider positive news, related to their clients, when making audit decisions. Using a large sample of US listed companies, we find that auditors charge lower audit fees and are less likely to issue going‐concern opinions when there are a higher number of positive news items related to their clients. Additional analyses show that the influence of positive client news on audit decisions varies with news characteristics, client size, auditor tenure, and auditor size. We also find some evidence that auditors' reactions to positive client news varies with the topic of news, and positive client news has implications for financial reporting quality and accuracy of going‐concern opinions. Collectively, these findings suggest that the media affects auditors' business risk and that auditors are not insulated to positive news.

The Impact of Artificial Intelligence Adoption on the Quality of Financial Reports on the Saudi Stock Exchange

The aim of this study was to explore how artificial intelligence (AI) impacts the quality of financial reporting, providing insights into new opportunities in this field for the Saudi context. This study employed the UTAUT theory to examine the adoption of AI technology in auditing practices. This study also utilized bibliometric analysis techniques through an academic literature review and content analyses of the documentary evidence. The implication of this study is that non-Big 4 audit firms should adopt AI-powered drones, which consequently enhance decision making, decrease audit fees, and enhance the quality of financial reports, and the efficiency and accuracy of audits. Furthermore, this paper recommends that non-Big 4 audit firms adopting AI should foster a culture of change to ensure quality audits and consistency, overcome resistance to the change, and support the integration of technologies such as AI-driven audit automation. Our study also indicated the importance of integrating AI with the IFRS, developing a new framework for AI in auditing practices, incorporating AI into auditing courses, and modernizing auditing using AI. These implications lead to financial reports of enhanced quality. The results indicated four clusters, with artificial intelligence being the most significant keyword occurrence. This study has limitations, such as the lack of consideration of cyber-attack risks on drones, which may reduce the reliability of financial reports. Based on the findings of this research, audit companies and regulatory agencies in Saudi Arabia, like the Saudi Capital Market Authority (CMA), may evaluate the integration of AI to improve the quality of financial reporting. Implementing AI is expected to enhance the quality of audits, automate reporting, and support regulatory compliance to foster confidence and transparency in the financial industry.

Unleashing the beast: the impact of big data and data analytics on the auditing profession—Evidence from a developing country

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.

Pengaruh Fee Audit, Ukuran Kap, Spesialisasi Auditor, dan Workload Terhadap Kualitas Audit

This study aims to analyze the effect of audit fees, audit firm size, auditor specialization, and workload on audit quality in companies listed on the LQ45 Index of the Indonesia Stock Exchange for the 2020-2022 period. A quantitative research method using secondary data from annual financial reports was employed. The sample was determined using purposive sampling based on specific criteria. The dependent variable is audit quality, measured using an earnings benchmark with Return on Assets (ROA) as a proxy. Independent variables include audit fees (natural logarithm), audit firm size (Big 4 and non-Big 4), auditor specialization (specialization percentage), and workload (Audit Capacity Stress). Data were analyzed using logistic regression with a 5% significance level. The results indicate that audit fees, audit firm size, auditor specialization, and workload do not significantly affect audit quality. The study's limitations include the use of a sample limited to LQ45 companies over three years and the inclusion of only four independent variables. Future research is recommended to include additional variables such as audit tenure, client pressure, and auditor reputation to improve the model.

Inquiry letter types, accountants' responses, and audit fees: Evidence from China

Inquiry letter types, accountants' responses, and audit fees: Evidence from China

Public Accounting Firm Characteristics on the Readability of Key Audit Matters

This study investigates the readability of Key Audit Matters (KAM) in a sample of 448 companies listed on the Indonesia Stock Exchange (IDX) using the INDX model and multiple regression analysis. The findings reveal that auditors from Big Four firms, auditor gender, meeting frequency, and company leverage negatively affect KAM readability, resulting in lower INDX scores and more complex reports. Conversely, factors such as audit fees, auditor experience, KAM type, audit committee size, and company size based on total assets do not significantly influence readability. A higher INDX score indicates better readability, suggesting that reports with lower scores are more difficult to understand. These findings provide insights for regulators and auditors to improve the clarity of audit reports, enhancing transparency and communication with stakeholders.

Auditors’ Response to Controlling Shareholders’ Share Pledging: Evidence from Audit Opinions and Audit Fees

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.

PENGARUH TIME BUDGET PRESSURE DAN FEE AUDIT TERHADAP KUALITAS AUDIT PADA KANTOR AKUNTAN PUBLIK (KAP) DI DAERAH JAKARTA SELATAN

In the face of increasingly fierce business competition and various problems in Indonesia, the role of public accounting services is very important with high demands for relevance and reliability. Auditors from the Public Accounting Firm (KAP) are responsible for providing reliable assurance of financial statements, but audit quality is still a concern due to incidents of fraud. This study aims to analyze the effect of time budget pressure and audit fees on audit quality. The problems discussed include the effect of time budget pressure on audit quality, the effect of audit fees on audit quality, and the effect of both simultaneously. This study uses primary data from questionnaires distributed to 70 auditors at 10 KAPs in South Jakarta. The sample selection was selected using purposive sampling technique. The hypothesis was tested with a two-tailed test. Analysis techniques include descriptive statistics, validity test, reliability test, normality test, Pearson product moment correlation analysis, multiple correlation analysis, multiple linear regression analysis, t test, F test, and coefficient of determination analysis. The test results show that partially, time budget pressure has a significant effect on audit quality, while audit fees have no significant effect. The F test results show that time budget pressure and audit fees simultaneously have no significant effect on audit quality, with a coefficient of determination of 7%.

PENDETEKSIAN FRAUDULENT FINANCIAL REPORTING DI LINGKUNGAN BUMN: PERSPEKTIF FRAUD HEXAGON THEORY

This study aims to analyze the influence of variables such as financial stability, financial targets, external pressure, ineffective monitoring, audit fees, change in director, change in auditor, total accruals, and CEO duality on the risk of fraudulent financial reporting in state-owned enterprises (SOEs). The study is grounded in agency theory, stakeholder theory, and the GONE theory. The research sample consists of 19 SOEs listed on the Indonesia Stock Exchange during the period 2017-2022, with a total of 114 observations. The sampling method used purposive sampling technique, and data analysis was conducted using logistic regression method with SPSS software version 27. The research findings that financial stability and financial targets have a significant positive impact on fraudulent financial reporting, while other variables do not have a significant influence.

The Interaction Effect of Female Leadership in Audit Committees on the Relationship Between Audit Quality and Corporate Tax Avoidance

This study examines the moderating role of female audit committee chairs on the relationship between audit quality (measured by audit fees) and corporate tax avoidance. The analysis is based on 165 UK firms between 2011 and 2021 using static panel data regression models and Lewbel’s heteroscedastic identification method to check robustness. The findings highlight the significant role of audit quality in reducing corporate tax avoidance. In addition, the female audit committee chair strengthens the negative relationship between audit quality and tax avoidance. This study has many implications. For corporate governance, it shows the value of female leadership in audit committees, especially in curbing aggressive tax strategies. Firms should increase female representation in key roles, like audit committee chairs, to improve oversight and ethical financial practices. For regulators and policymakers, it supports the case for strengthening gender diversity mandates to improve corporate transparency and accountability. Tax authorities can use the fact that firms with strong audit quality and female-led audit committees are less likely to engage in tax avoidance to focus their audits on companies with weaker governance structures.

COVID-19-Related Audit Report Disclosures: Determinants and Consequences

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.

Why Do ESG Rating Differences Affect Audit Fees?—Dual Intermediary Path Analysis Based on Operating Risk and Analyst Earnings Forecast Error

As environmental, social, and governance (ESG) issues become increasingly important, ESG ratings have become a significant factor influencing audit fees for businesses. However, ESG ratings are typically assessed by multiple agencies or rating firms and, due to differences in evaluation criteria, methodologies, and data sources, the ratings provided by different institutions may vary considerably. Therefore, research on the impact of discrepancies in ESG ratings on audit fees is of great significance. This paper examines this phenomenon by analyzing a sample of Chinese listed companies from 2015 to 2022, yielding 3056 observational values through various methodologies. The study employs two-way fixed effects methods. The findings indicate that discrepancies in ESG ratings significantly elevate enterprises’ audit expenses, with operating risk and analyst earnings forecast errors serving as intermediary factors. Additionally, media attention intensifies these effects by increasing corporate disclosure, intensifying regulatory pressure, and heightening reputational risks for the company, and the positive impact of ESG rating discrepancies on audit fees is more significant when the “Big 4” accounting firms are involved in the audit. The research offers insights for enterprises, auditors, and regulatory bodies, contributing to the enhanced implementation of the ESG concept and fostering sustainable enterprise development.

Does financial asset allocation term structure affect audit fees? Evidence from China.

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.

Attributes of Auditor’s Independence, Audit Fees and Audit Quality in Listed Deposit Money Banks in Nigeria.

Attributes of Auditor’s Independence, Audit Fees and Audit Quality in Listed Deposit Money Banks in Nigeria.

Bribes and audit fees

Bribes and audit fees

An Impact of Major Customer Concentration on the Audit Hour and Audit Fee

An Impact of Major Customer Concentration on the Audit Hour and Audit Fee

Artificial intelligence adoption, audit quality and integrated financial reporting in GCC markets

PurposeThe current research investigates how the adoption of Artificial Intelligence (AI)—a set of technologies designed to enhance decision-making and automate processes—impacts Integrated Financial Reporting (IFR) in Gulf Cooperation Council (GCC) listed firms, which present the typical features of emerging economies. It is postulated that their IFR is enhanced as firms within these markets experience AI adoption. In addition, the study also focuses on the role of audit quality towards AI adoption and the IFR relationship within these regions. To this effect, the study examines the moderation effect of audit quality (using its sub-components i.e. audit fee, audit industry specialization and restatement) on the relationship between AI adoption experience and IFR in GCC.Design/methodology/approachThe investigation draws upon panel data consisting of 2,912 non-financial firm-year observations covering the period from 2010 to 2023 across GCC markets. To achieve its purpose, the study applies the conventional ordinary least square (OLS) to estimate the effect of AI adoption experience on IFR. Subsequently, to guarantee the robustness of the results, this study utilizes the propensity score matching (PSM) technique.FindingsThe results from empirical analysis disclose a direct impact of AI adoption on the IFR of the firms within GCC markets. Furthermore, the study also discovers that the high level of audit quality moderates this positive relationship. Therefore, in the GCC regions, firms with higher AI adoption show higher IFR effectiveness, mainly in the presence of specialized auditors and increased audit fees, whereas their relationship is stronger in the absence of restatements. The results are robust when tested through the PSM technique.Originality/valueThe results of this study highlight the significance for policymakers to ensure comprehensive AI adoption in GCC markets, as well as the appointment of industry specialists and the standardization of audit fees to support the improvement of IFR in the regions.