Attributes Influencing Clients' Auditor Choices: The Expectation Gaps between Auditors and Board Members

Goddard, Francis; Schmidt, Martín

doi:10.2308/ciia-19-026

Cited by 4 publications

(7 citation statements)

References 21 publications

(24 reference statements)

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“…Our findings are mixed as far as the importance of audit fees in clients' auditor choices is concerned. The majority of board members do not consider audit fees to be a particularly important factor in their auditor choice decisions, which is consistent with more recent evidence (Goddard & Schmidt, 2020;Taminiau & Heusinkveld, 2017). A minority consider an audit as a standardized service and will select their auditor primarily based on audit fees.…”

Section: G U R E 2 Audit Fee Increases: Auditor Pricing Practices and Justifications Client Reactions And Potential Implicationsmentioning

confidence: 54%

“…Similarly, a recent study surveying non-executive board members and auditors shows that board members deem audit quality attributes as more important than audit fees and that auditors overestimate (underestimate) the importance of audit fees (audit quality attributes) (Goddard & Schmidt, 2020). The prior literature has shown that independent audit committee members demand high audit quality and are more likely to choose specialist auditors (Abbott & Parker, 2000).…”

Section: Auditor Choicementioning

confidence: 99%

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Exploratory insights into audit fee increases: A field study into board member perceptions of auditor pricing practices

Goddard

Schmidt

2021

Int J Auditing

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Audit research documents audit fee discounts associated with an auditor change, and that audit fees revert to average levels within a few years. This paper provides exploratory insights into the perceptions of board members vis-à-vis pricing practices used by auditors to achieve audit fee increases. In semi-structured interviews with 12 respondents (10 board members and two audit managers), we elicit perceptions on initial audit fee discounts, auditor pricing practices and client reactions to these pricing practices. The key findings indicate that auditors combine two pricing practices to achieve audit fee increases. First, they negotiate higher fees prior to the annual audit cycle, citing changes in client structure/size and the institutional environment. Second, they charge higher than negotiated fees after completing the audit ('extra-billing'), citing justifications such as chargeable hour overruns and findings warranting additional work. Potentially, such auditor pricing practices have negative implications for audit quality and damage the auditor-client relationship.

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Section: G U R E 2 Audit Fee Increases: Auditor Pricing Practices and Justifications Client Reactions And Potential Implicationsmentioning

confidence: 54%

Section: Auditor Choicementioning

confidence: 99%

Exploratory insights into audit fee increases: A field study into board member perceptions of auditor pricing practices

Goddard

Schmidt

2021

Int J Auditing

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“…The writings of accountants and external auditors frequently report the occurrence of the Audit Anticipation Gap in both developed and emerging economies (e.g. Aminu, 2022, Lazarus et, al., 2022, Yuqi He 2021, Begona, 2021, Nurul, 2021, Stephany et al, 2021, Taslima,2020El Nashar, et, al, 2020;Paul et, al 2020;Goddard, 2020;Safiyanu Sule,2019;Nadhim, 2018;Mohamed et, al., 2017; J.S. Kumari, 2017;Najeb, 2017).…”

Section: Literature Reviewmentioning

confidence: 99%

“…Conversely, Goddard (2020), conducted an empirical survey research in Germany to examine the expectation gap between auditors and board members. With special focus in identifying the attributes which influence client"s auditors choice.…”

Section: Literature Reviewmentioning

confidence: 99%

A Blueprint for Minimizing Audit Anticipation Gap in a Developing Country: Stakeholders Perceptions

Ghandour¹

2023

IJBA

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Purpose: This paper provides a blueprint for minimizing Audit Anticipation Gap (AAG) in a developing country. The focus was on exploring the occurrence, causes, and consequent effects of the Audit Anticipation Gap in Sudan, by identifying the possible factors that contribute to that gap. This was achieved by surveying the opinions of practicing external auditors, key users of financial statements, and accounting educators.Research Design/Methodology/Approach: A qualitative research approach was adopted through a cross-sectional survey, using in-depth face-to-face structured personal interviews. Furthermore, purposive/judgmental sampling was utilized to select interviewees. Twenty-nine interviews were carried out, and their responses were analyzed using thematic content analysis.Major Findings: The findings did indicate that an Audit Anticipation Gap exists in Sudan due to a weak and undeveloped accounting and auditing profession in the country, ambiguity concerning auditor’s independence, lack of external auditor rotation in the majority of the financial sectors, rendering both audit and non-audit services, absence of rules and regulations that govern external audit practices. Furthermore, major contributing factors included misunderstanding the objectives of auditing, the audit process, and the auditor’s roles and responsibilities by key users of financial statements.Practical Implications: The study provided a wide range of findings that have significant implications for policy making geared toward minimizing the Audit Anticipation Gap in the country, so that accounting will play its proper role in its sustainable economic development.Originality/Value: This study contributes to the existing literature by providing detailed and comprehensive findings from a region that has gained little focus on the subject matter. Specifically, it has shed light on the weaknesses of the accounting and auditing profession in Sudan, with a particular emphasis on the Audit Anticipation Gap. Thus, by surveying the viewpoints of the key stakeholders, the study provided prescriptions for turning around the accounting profession in the country to a potential world-class status.

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“…Firms are looking for insight which can provide reasons behind the selection of an audit firm and how much this selection is attributable to audit fee and relative to other factors. All these dynamics set forth the rationale for this study to explore; what drive the audit firm selection, and what are the client perceptions about the value of audit services they receive (Goddard & Schmidt, 2020).…”

Section: R M B Rmentioning

confidence: 99%

Determinants of Audit Firm Selection Decision: A Qualitative Study of Firms Listed on Pakistani Stock Exchange (PSX)

Naveed¹,

Qadir²,

Umer³

2020

IRMBR

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The objective of this study is to offer detailed and updated overview of the factors perceived by the audit committee members to select external auditors. Moreover, the study aims to explore that what are the main determinants perceived by the clients from their external auditors. Qualitative research design is used, and open-ended interviews has been conducted to explore the phenomena under investigation. The contextual setting of the study is provided by financial firms listed on Pakistan stock exchange (PSX-100). The study finds that management continues to provide input into the selection decision of external auditors because the audit committees view management as an important information source. Audit committee seeks input from management to assess the external audit accessibility, reputation, firm’s industry knowledge and technical expertise. The result of the study suggests that more regulations are required to liable the audit committees for selecting external audit firm. The management input raises the audit risk and mitigate the audit independence. The findings remain robust for audit firms and companies looking for an independent and transparent relationship. Also, the study has implications to build transparent financial disclosure practices. Keywords: Audit Quality, Pakistan Stock Exchange, Clients Perceived Value.

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Attributes Influencing Clients' Auditor Choices: The Expectation Gaps between Auditors and Board Members

Cited by 4 publications

References 21 publications

Exploratory insights into audit fee increases: A field study into board member perceptions of auditor pricing practices

Exploratory insights into audit fee increases: A field study into board member perceptions of auditor pricing practices

A Blueprint for Minimizing Audit Anticipation Gap in a Developing Country: Stakeholders Perceptions

Determinants of Audit Firm Selection Decision: A Qualitative Study of Firms Listed on Pakistani Stock Exchange (PSX)

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