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Agency Problems and Audit Fees : Further Tests of the Free Cash Flow Hypothesis

Griffin, Paul A.; Lont, David H.; Sun, Estelle - 2009

This study finds that the agency problems of companies with high free cash flow (FCF) and low growth opportunities induce auditors of companies in the United States to raise audit fees to compensate for the additional effort. We also find that high FCF companies with high growth prospects have...

Persistent link: https://www.econbiz.de/10014204083

Resource Allocation Decision in Audit Engagements

Hackenbrack, Karl; Knechel, Warren Robert - 2012

We examine the empirical relationship between auditor's resource allocations and selected engagement characteristics. Our measure of resources is hours of grades of labor (partner, manager, etc.) "charged" to audit activities (planning, internal control evaluation, etc.). Engagement...

Persistent link: https://www.econbiz.de/10014122909

Switching Costs and Market Power in the Auditing Industry : Evidence from a Structural Approach

Guo, Qiang; Koch, Christopher; Zhu, Aiyong - 2022

This study provides novel evidence on the magnitude of switching costs in auditing. We use a discrete choice approach to infer switching costs from clients' auditor choices. The demand estimation reveals that switching costs matter and that they differ by the direction with switching from...

Persistent link: https://www.econbiz.de/10014080401

When Do Auditors Use Specialists’ Work to Develop Richer Problem Representations of Complex Estimates?

Griffith, Emily E. - 2017

Auditors must recognize problematic patterns among the assumptions underlying complex estimates to identify misstatements. Pattern recognition requires rich problem representations of complex estimates that auditors may be unable to develop given their lack of valuation expertise. I predict and...

Persistent link: https://www.econbiz.de/10012971633

The Importance of Quantifying Uncertainty : Examining the Effects of Sensitivity Analysis and Audit Materiality Disclosures on Investors’ Judgments and Decisions

Eilifsen, Aasmund - 2017

The amount of estimation uncertainty contained in financial statement items may be obscured from investors, given that all estimates, regardless of their imprecision, are reported as precise figures on the face of the financial statements. Our study examines two disclosures expected to help...

Persistent link: https://www.econbiz.de/10012956642

Spatial Competition at the Intersection of the Large and Small Audit Firm Markets

Bills, Kenneth L. - 2015

In this paper, we study spatial competition in the U.S. audit market while accounting for its two-tiered nature. We provide evidence on the differential impact that market share distances within and between the players in the large and small audit markets have on competition. We find that the...

Persistent link: https://www.econbiz.de/10013035663

The Importance of Quantifying Uncertainty : Examining the Effects of Sensitivity Analysis and Audit Materiality Disclosures on Investors’ Judgments and Decisions

Eilifsen, Aasmund - 2019

Persistent link: https://www.econbiz.de/10012890036

Audit Pricing, Legal Liability Regimes, and Big 4 Premiums : Theory and Cross-Country Evidence

Choi, Jong-Hag; Liu, Xiaohong; Kim, Jeong-Bon; Simunic, … - 2012

In this paper, we first develop a model in which national legal environments play a crucial role in determining auditor effort and audit fees. Our model predicts that: (1) audit fees increase monotonically with the strength or strictness of a country’s legal liability regime; (2) given a legal...

Persistent link: https://www.econbiz.de/10014027949

Auditor Tenure and Rotation

Lennox, Clive S. - 2012

This article reviews global practices on auditor rotation and discusses the pros and cons of mandatory rotation. While … many studies have examined auditor tenure and rotation, I argue that the literature has not yet answered the question as to … whether mandatory rotation is desirable. The reason for this impasse is that there are major obstacles preventing us from …

Persistent link: https://www.econbiz.de/10013099043

Application of Data Envelopment Analysis in Auditing

Feroz, Ehsan H. - 2019

A data processing procedure, DEA (Data Envelopment Analysis) is described as as an analytical tool in audit engagement. DEA receives data inputs from from financial statements of a plurality of clients, constructs efficiency frontiers and evaluates relative income efficiencies. DEA can be used...

Persistent link: https://www.econbiz.de/10012897175