The Influence of Client Corporate Social Responsibility Performance Information on Auditor Judgments

Our experiment, with 106 practicing auditors, tests whether audit judgments are influenced by client CSR performance, individual auditors' views of CSR, and auditors' perceptions of client risk induced by CSR performance. Results indicate auditor judgments are less (more) conservative for clients with positive (negative) environmental performance. We find that client risk assessments mediate the link between environmental performance and account-level judgments. In contrast, results indicate that socially-oriented performance has no overall significant influence on audit judgments in our experiment. Overall, our results indicate that different dimensions of CSR and the salience of the CSR issue can have differential effects on audit judgments.

Chief executive officer retirement and auditor’s risk assessment

Purpose This study aims to examine the unique nature of family firms by investigating the moderating effect of chief executive officer (CEO) identity on CEO career horizon and the auditor’s client risk assessment. Consistent with literature on family businesses, the level of CEO attachment to socio-emotional wealth (SEW) varies among family businesses. Design/methodology/approach This study used a longitudinal sample of 2,063 non-financial family firm-year observations from 2005 to 2016 listed on the Bursa Malaysia. The study used the general method of moments (GMM), which controls for endogeneity concerns. Findings The results reveal that, without the moderating effect of CEO identity, the relationship between CEO career horizon and auditor’s risk assessment is positive, which suggests that the auditor’s risk perception of retiring CEOs is very high. However, the interaction of CEO identity reverses the relationship as evidenced by the negative and significant coefficient on the interacted terms. The finding suggests that the auditor’s perceived risk associated with CEO career horizon is lower in family firms with CEOs affiliated to family members or in which the CEO has an equity stake. Overall, the findings provide compelling evidence that the extent of the CEO’s attachment to the firm’s SEW affects the auditor’s client risk assessment. Practical implications The findings of the study serve as an enlightenment to policymakers such as Bursa Malaysia and Security Commission that within the family-controlled firms, differences still exist; therefore, there might be a need for future regulatory initiative to cater for the specific need of family-controlled firms. Originality/value The study contributes to prior literature by departing from the agency theory adopted in previous studies on auditor choice in family firms under the assumption that family firms are homogenous.

Risk of fraud classification

In this article, we define consumers’ profiles of electricity who commit fraud. We also compare these profiles with users’ profiles not classified as fraudsters in order to determine which of these clients should receive an inspection. We present a statistically consistent method to classify clients/users as fraudsters or not, according to the profiles of previously identified fraudsters. We show that it is possible to use several characteristics to inspect the classification of fraud; those aspects are represented by the coding performed in the observed series of clients/users. In this way, several encodings can be used, and the client risk can be constructed to integrate complementary aspects. We show that the classification method has success rates that exceed 77%, which allows us to infer confidence in the methodology.

Determinants of audit fees: The perception of external auditors

This paper examines the perception of external auditors on the dominant factors that influence audit fees determination. By means of a survey, the study explored from the perspective of external auditors the level of importance audit firms attach to some identified factors in the determination of audit fees. A self-administered questionnaire was used to gather data from professional auditors working with practicing auditing firms certified and approved by the Institute of Chartered Accountants, Ghana (ICAG). Using a total of 339 valid responses, the study explored the dimensionality of the factors that influence audit fees by employing the Exploratory Factor Analysis (EFA) procedure. Based on the factor structure identified from the EFA, we subsequently evaluated the level of importance auditors perceive these factors to be in the determination of audit fees. The EFA results suggest that audit fees determinants can be grouped into five distinct factors (Audit firm reputation, experience & expertise; Nature and scope of the audit; Market-wide factor; Client size; Client risk). The factor ‘Client risk’ was rated to be the most important determinant of audit fees distantly followed by the ‘Nature and scope of the audit’ factor. The ‘Market-wide factor’ was rated to be the least important factor in the determination of audit fees. The findings of this study provide some useful insights from the perspective of external auditors on the factors that influence audit fees from a developing country context.

Characteristics of Managerial Tone Priced by Auditors: Evidence Based on Annual Letters to Shareholders of Large U.S. Firms

SUMMARY We examine the relationship between audit pricing and managerial tone as a proxy of source credibility. Prior research shows that source credibility influences auditors' perceptions of client risk. Textually analyzing annual letters to shareholders, we find that characteristics of managerial tone that reflect impaired source credibility are associated with higher audit fees. Additional tests, including a change analysis and controls for other managerial characteristics, future client performance, and aggressive accounting choices, corroborate and build on our inferences that managerial tone proxies for source credibility. Our study extends literature that uses corporate disclosures to measure managerial characteristics by showing that auditors price source credibility reflected in managerial tone. These findings are important because they empirically confirm that source credibility affects auditors' assessments of engagement risk and that analysis of tone can inform researchers, auditors, and investors who seek to enhance effectiveness and objectivity in assessing source credibility based on managerial tone. JEL Classifications: G21; G34; M41. Data Availability: The data in this study are available from public sources indicated in the paper.

Pengaruh Ukuran Perusahaan, Risiko Perusahaan Dan Kompensasi Terhadap Audit Fee:

This study aims to analyze some factors that influence the determination of external auditor audit fees on manufacturing companies listed on Indonesia Stock Exchange (BEI). The factors tested in this study are firm size, client risk and compensation. The data used in this study are secondary data and the selection of the sample is using purposive sampling method. The study samples were 18 manufacturing companies listed in the Indonesia Stock Exchange (BEI). The result of this research showed that firm size has positive significant relationship on the external auditor audit fees. However client risk and compensation have no relationship on the external auditor audit fees. Future research is expected can add another proxy to measure firm size, client risk and compentation. Future research also needs to consider a wider sample such as covering the entire populations on Indonesia Stock Exchange and extend the time of research.