The Impact of IFRS Adoption on Audit Fees and Audit Quality

Greater pricing presume on audit service has been put by the regulations of the auditing and accounting practices for the disclosure of audit fees, since audit fee is directly related to audit quality. However, the audit fees perceived by the client is often different from the amount charged by the auditors. Hence, this study investigated the impact of firm-specific characteristics on audit fees of quoted consumer goods firms in Nigeria using a purposive sampling technique. Secondary data were obtained from annual reports of the companies for the period from 2009-2016. The empirical result from Breusch-Pagan Lagrange Multiplier Test (BP-LM) produced a chi-square value of 13.94 with p-value of 0.0001 indicating that pooled ordinary least squares (OLS) will not be appropriate for the study. The Hausman test showed a chi-square of 23.55 with a p-value of 0.001 indicating that the null hypothesis is strongly rejected. Thus, the only estimate from the fixed effect model was interpreted to explain the relationship between firm-specific characteristics and audit fees of quoted consumer goods firms in Nigeria. The result revealed that auditee size, auditee risk, auditee profitability and IFRS adoption are the firm specific characteristics that impact on audit fees with only auditee size and IFRS adoption being positively related to audit fees while the other factors are negatively related to audit fees. Based on this finding, this study concluded that the firm’s specific factors are the major drivers of audit fees in Nigeria consumer goods firms. This study recommends among others that companies should implement corporate governance principles that address issues relating to board independence and committee sizes to guide activities in the consumer goods sector since profitability behave negatively with audit fees.

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The association between abnormal audit fees and audit quality after IFRS adoption

International Journal of Accounting and Information Management ◽

10.1108/ijaim-07-2015-0044 ◽

2016 ◽

Vol 24 (3) ◽

pp. 252-271 ◽

Cited By ~ 9

Author(s):

Soo-Jung Jung ◽

Bum-Joon Kim ◽

Ju-Ryum Chung

Keyword(s):

Financial Reporting ◽

Audit Quality ◽

Audit Fees ◽

Discretionary Accruals ◽

Content Type ◽

Discretionary Accrual ◽

Ifrs Adoption ◽

Audit Fee ◽

The Impact ◽

The Relationship

Purpose This paper aims to examine how the relationship between abnormal audit fees and audit quality changed after adoption of the International Financial Reporting Standards (IFRS) in Korea. Design/methodology/approach Using empirical data collected over the period from 2008 to 2013, this study analyzes the association between abnormally high/low audit fee and audit quality. This study uses linear regression to test the hypothetical relation using discretionary accrual as a proxy for audit quality. Findings This study finds that there exists no significant relationship between abnormally high audit fees and audit quality measured by the magnitude of discretionary accruals in the pre-IFRS adoption period. However, the relationship between abnormally high audit fees and the magnitude of discretionary accruals turns to be positive in the post-IFRS adoption period. These finding suggests that the IFRS enables some clients to engage more discretion in the choice of discretionary accruals and auditors charge higher audit fees in return for allowing the discretion for such clients. Practical implications This study provides insight to regulators of the need to review carefully the financial statements of firms with abnormally high audit fees, and to investors to be more cautious when using financial information about these firms. Originality/value To the best of authors’ knowledge, this is the first study to assess IFRS impact on audit fee-quality relation. Also, unique Korean audit market with intensifying competition and discounting audit fee provides interesting setting to review the impact of abnormal audit fee on audit quality.

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The Effect of Office Changes within Audit Firms on Clients' Audit Quality and Audit Fees

Auditing A Journal of Practice & Theory ◽

10.2308/ajpt-52591 ◽

2020 ◽

Vol 39 (1) ◽

pp. 71-99

Author(s):

Carl W. Hollingsworth ◽

Terry L. Neal ◽

Colin D. Reid

Keyword(s):

Audit Quality ◽

Audit Fees ◽

Additional Analysis ◽

Audit Firm ◽

Audit Firms ◽

Audit Fee ◽

The Impact ◽

Audit Partner Rotation

SUMMARY While prior research has examined audit firm and audit partner rotation, we have little evidence on the impact of within-firm engagement team disruptions on the audit. To examine these disruptions, we identify a unique sample of companies where the audit firm issuing office changed but the audit firm did not change and investigate the effect of these changes on the audit. Our results indicate that companies that have a change in their audit firm's issuing office exhibit a decrease in audit quality and an increase in audit fees. In additional analysis, we partition office changes into two groups—client driven changes and audit firm driven changes. This analysis reveals that client driven changes are more likely to result in a higher audit fee while audit quality is unchanged. Conversely, audit firm driven changes do not result in a higher audit fee but do experience a decrease in audit quality.

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Investigating the impact of audit features on money laundering

Journal of Money Laundering Control ◽

10.1108/jmlc-09-2019-0072 ◽

2020 ◽

Vol 23 (4) ◽

pp. 913-930

Author(s):

Shaban Mohammadi ◽

Nader Naghshbandi ◽

Zahra Moridahmadibezdi

Keyword(s):

Money Laundering ◽

Audit Quality ◽

Screening Method ◽

Audit Fees ◽

Statistical Population ◽

Content Type ◽

Quality Audit ◽

Auditor Tenure ◽

Audit Fee ◽

The Impact

Purpose The purpose of the present study is to investigate the impact of audit features, including audit quality, audit fees and auditor tenure on money laundering in Iranian stock companies. Design/methodology/approach This research is descriptive-correlational and applied in terms of purpose. To evaluate the audit features, variables including audit quality, audit fee and auditor tenure were used. The statistical population of this study includes all companies listed in Tehran Stock Exchange and the research period from 2012 to 2018. A sample of 150 companies was selected by the screening method. In this study, logistic regression and Eviews 10 software were used for data analysis and hypothesis testing. Findings The results showed that variables including audit quality, normal audit fee and auditor tenure have a significant effect on money laundering. Originality/value Observing money laundering rules and regulations for businesses involves is a critical issue. In auditing the financial statements of the business units subject to these laws, the auditor reviews their actions to obtain reasonable assurance of guaranteeing the money laundering laws, evaluates their effectiveness and gains approval of managers regarding observing laundering regulations. In this regard, the auditor is required to report definitive or suspected money-laundering cases or its certain or suspected evidence to the relevant authorities. Although the law prohibits the auditor from disclosing such matters to the client, it is not necessary. It seems that even if the auditors perform non-audit functions, they should report money laundering or suspicious operations and transactions.

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The Impact of Mandatory IFRS Adoption on Audit Fees: Theory and Evidence

The Accounting Review ◽

10.2308/accr-50223 ◽

2012 ◽

Vol 87 (6) ◽

pp. 2061-2094 ◽

Cited By ~ 131

Author(s):

Jeong-Bon Kim ◽

Xiaohong Liu ◽

Liu Zheng

Keyword(s):

Financial Reporting ◽

Reporting Quality ◽

Audit Fees ◽

Data Availability ◽

Financial Reporting Quality ◽

Financial Reporting Standards ◽

Ifrs Adoption ◽

Audit Fee ◽

European Union Countries ◽

The Impact

ABSTRACT: This study examines the impact of International Financial Reporting Standards (IFRS) adoption on audit fees. We first build an analytical audit fee model to analyze the impact on audit fees for the change in both audit complexity and financial reporting quality brought about by IFRS adoption. We then test the model's predictions using audit fee data from European Union countries that mandated IFRS adoption in 2005. We find that mandatory IFRS adoption has led to an increase in audit fees. We also find that the IFRS-related audit fee premium increases with the increase in audit complexity brought about by IFRS adoption, and decreases with the improvement in financial reporting quality arising from IFRS adoption. Finally, we find some evidence that the IFRS-related audit fee premium is lower in countries with stronger legal regimes. Our results are robust to a variety of sensitivity checks. Data availability: Data are available from public sources identified in the paper.

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Audit Fees and Financial Performance of Deposit Taking Saccos in North RIFT, Kenya

International Journal of Innovation and Economic Development ◽

10.18775/ijied.1849-7551-7020.2015.65.2002 ◽

2020 ◽

Vol 6 (5) ◽

pp. 15-27

Author(s):

Dorris Serem ◽

Dr. Rashid Fwamba ◽

Dr. Alala Benedict

Keyword(s):

Financial Performance ◽

Audit Quality ◽

Secondary Data ◽

Financial Statements ◽

Audit Fees ◽

Positive Influence ◽

Auditor Independence ◽

Audit Firm ◽

Firm Experience ◽

The Impact

The collapse of Deposit-Taking SACCOS and financial institutions in Kenya has caught the attention of the public and supervisory agencies to query the quality of audit. SACCO Societies Regulatory Authority on its inspection report indicated that SACCOs have been implicated in maladministration, scams and fraudulent dealings that led to their eventual collapse. SASRA also revoked licenses and rejected audited financial statements of some Deposit Taking SACCOs between 2013 to 2017.These financial scandals have been traced to poor audit quality. The study aimed to test the impact of audit quality on financial performance of Deposit-Taking SACCOs in North Rift Region, Kenya. The study sought to establish the influence of audit fees on financial performance; determine the influence of audit firm tenure on financial performance; establish the influence of auditor independence on financial performance and to determine the influence of audit firm experience on financial performance of Deposit-Taking SACCOs in North Rift Region, Kenya. This study was based on Agency theory, Role theory and the Concept of audit expectation gap, and Stakeholders’ theory. This research adopted descriptive cross-sectional research design. The target population for the study was 266 staff of all the 16 registered Deposit-Taking SACCOs in North Rift Region, Kenya. The sample size was 48 respondents comprising of chief executive officers, finance officers and internal auditors of the Deposit-Taking SACCOs selected using purposive sampling method. Primary and secondary data was used. Questionnaires collected primary data while audited annual financial statements of SACCOs provided secondary data. Inferential and descriptive statistics was used in analyzing data through SPSS version 25. It emerged that audit fees, audit firm tenure and audit firm experience have a significant positive influence on financial performance of Deposit-Taking SACCOs in North Rift Region, Kenya. Auditor independence had an insignificant positive influence on financial performance of Deposit-Taking SACCOs in North Rift Region, Kenya. The study concluded that audit quality has a positive noteworthy impact on financial performance of Deposit-Taking SACCOs in Kenya. The study recommends that regulatory authorities should formulate strict rules on audit fee charges and oversee the implementation of the same. Also, SASRA should ensure DT-SACCOs implement auditor rotation in compliance with auditing regulations and standards. DT-SACCOs to consider auditor’s professional competence and experience before initiating any audit engagement. Finally, DT-SACCOs and auditors should reinforce the professional code of ethics in regard to auditor independence in terms of familiarity between auditor and the client that may lead audit work into jeopardy.

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A theoretical approach to auditor independence and audit quality

Corporate Ownership and Control ◽

10.22495/cocv17i2art11 ◽

2020 ◽

Vol 17 (2) ◽

pp. 124-141

Author(s):

Rahman Yakubu ◽

Tracey Williams

Keyword(s):

Audit Committee ◽

Audit Quality ◽

Audit Fees ◽

Auditor Independence ◽

Accounting Scandals ◽

Audit Firms ◽

Mandatory Audit Firm Rotation ◽

The Impact ◽

Insight Into

Auditor independence and the quality of audit report is of growing concern to regulators, institutional investors and stakeholders as a series of accounting scandals have undermined the professionalism of auditors. The findings from this study produced an insight of how auditor’s independence improve audit quality and that abnormal audit fees is as a result of additional effort for auditor to carry out rigorous audit engagement as a result of wider audit scope; that mandatory audit firm rotation will enhance auditor independence, and that audit committee with nonexecutive independence will promote audit quality. The study also finds that in terms of auditor size, smaller audit firms that belong to professional bodies will provide higher audit quality. The main conclusion of this research is that where an auditor is fully independent in carrying out audit engagement with strong resistance to fees pressure will enhance audit quality. This research provides insight into the impact of IFRS adoption on audit fees.

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The effect of mandatory XBRL and IFRS adoption on audit fees

International Journal of Managerial Finance ◽

10.1108/ijmf-12-2013-0139 ◽

2016 ◽

Vol 12 (2) ◽

pp. 109-135 ◽

Cited By ~ 7

Author(s):

Yuan George Shan ◽

Indrit Troshani

Keyword(s):

Financial Reporting ◽

Developing Economies ◽

Stock Exchange ◽

Audit Fees ◽

Listed Companies ◽

Emerging Economy ◽

Economic Consequences ◽

Content Type ◽

Ifrs Adoption ◽

The Impact

Purpose – The purpose of this paper is to evaluate the impact of the International Financial Reporting Standards (IFRS) and eXtensible Business Reporting Language (XBRL) on audit fees based on evidence from listed companies operating in an emerging economy. Whilst IFRS constitute high-quality accounting standards, XBRL represents a technology standard that can enhance the usability of IFRS and overall financial reporting transparency. Design/methodology/approach – Multivariate analyses are used on a sample of 1,798 firm-year observations between 2000 and 2011 from companies listed in the Shanghai Stock Exchange that were subject to XBRL and IFRS adoption mandates. Findings – The main results suggest that XBRL has a main negative effect on audit fees which is weaker for larger firms. Additionally, the authors find that IFRS increases audit fees for all companies. Whilst this effect is positive for firms of different sizes, it is weaker for larger firms. Research limitations/implications – Whilst the findings are applicable to the selected sample and may or may not be generaliseable to other economies, they can provide important implications for both regulators and companies that are undertaking IFRS convergence and XBRL implementation projects in developing economies around the world. Originality/value – This study offers a timely assessment of the economic consequences of IFRS and XBRL on listed companies operating in an emerging economy, in addition to providing an important basis upon which further research can be designed in order to extend the analysis.

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