Abnormal Monitoring Costs Charged for Auditing Fair Value Model: Evidence from Jordanian Finance Industry

Abstract

This article inspects the likely outcome of using the fair value (FV) concept on audit firms’ anomalous audit fees. The research performs fixed effects regression to evaluate the given hypotheses using data gathered by hand from 105 Jordanian publicly traded enterprises between 2005 and 2018. The study reveals that FV proxies have a favorable and substantial effect on the atypical audit fees paid by Jordanian enterprises. The findings are more evident for businesses with a higher percentage of subjective FVs (level 3 assets). This research gives current empirical information on the effects of adopting IFRS/IAS for policymakers and standard setters. The results contribute by offering recommendations on the factors that influence audit fees for auditors and clients. The present research updates the Fair Value Disclosure (FVD) auditing model and adds new empirical data to close a gap in the auditing literature. It adds to the limited and inconclusive audit price studies already available by examining the post-implementation of FVD. This research gives current empirical facts on the consequences of adopting an FV model in Jordan for policymakers and standard setters. Additionally, this investigation adds by offering information on the factors that influence audit fees for both auditors and clients. The findings provide regulatory authorities with information on observing and regulating the audit vocation as well as on auditing FVD activities.

Key audit matters and auditing quality in the era of COVID-19 pandemic: the case of Jordan

“…(2020) reported that audit firms are now conducting virtual audits using expensive and complex cutting-edge technology to obtain financial evidence and provide expertise for more adaptable client communications. Alharasis et al (2022) stated that auditors were expected to spend a longer period on their work and charge greater costs during financial crises. According to research by Harjoto and Laksmana (2022), global audit costs and latency rose as a result of COVID-19 lockdowns and hospital limitations.…”

“…Concerns for the auditing profession include charging reasonable rates, using competent people and providing valid audit opinions. Researchers have hypothesized that the financial performance, risk and liquidity of customers are positively correlated with economic conditions (Alharasis et al , 2022; Albitar et al , 2021), which, in turn, affects audit fees. Companies can default on lending agreements during economic downturns.…”

“…Since the Global Financial Crisis (GFC), COVID-19 has become the greatest challenge for accountancy, auditing and their clients (Albitar et al , 2021). As a result of the crisis, there have been requests for improved financial reporting quality, audit efficiency, integrity and transparency (Alharasis et al , 2022).…”

“…Research on KAM has primarily examined factors affecting the amount of reported cases (Pinto and Morais, 2019; Sierra-García et al , 2019; Alharasis et al , 2023d, 2023e) and the expanded auditor reporting legal implications of Kachelmeier et al (2020), Gimbar et al (2016) and Asbahr and Ruhnke (2019). The quality of financial reports and the audit procedure during the COVID-19 outbreak were studied as KAM determinants.…”

Auditor industry expertise and external audit prices: empirical evidence from Amman Stock Exchange-listed companies

“…Most of Jordan's 300 audit firms are small. Big 4 auditing companies operate there (Alharasis et al, 2022b). Jordan's JACPA certifies accountants (Abdullatif and Al-Rahahleh, 2020).…”