Evidence on the Audit Risk Model: Do Auditors Increase Audit Fees in the Presence of Internal Control Deficiencies?*

Hogan, Chris E.; Wilkins, Michael S.

doi:10.1506/car.25.1.9

Cited by 550 publications

(408 citation statements)

References 25 publications

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“…It should point out that, auditee characteristics have taken great attention in previous studies. They include the characteristics of client size (Simunic, 1980) risk (Hogan & Wilkins, 2008) complexity (Ghosh & Lustgarten, 2006) and profitability (Hay, Knechel & Wong, 2006). As indicated before, auditor characteristics are also considered as significant drivers of external audit fees.…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Determinants of Audit Fees: Evidence from Jordan

Kikhia¹

2014

AFR

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This study sets out to examine the factors influencing the level of external audit fees paid by firms to their auditors in Jordan. Specific attention is focused on the investigation of the potential influence of auditee size, complexity of client, profitability, client risk, auditor size and auditor tenure on audit fees, by using the Sample which contains 117 non-financial Jordanian companies which listed on Amman Stock Exchang, meet the selection standards and have the applicable and appropriate financial data from 2010 until 2012 (351 observation). The current study strongly reinforces that greatest of prior studies results are also appropriate and applicable to the Jordanian audit market. Moreover, the current study provides further evidence connecting variables such as the auditor tenure effects and auditee risk which have been found to have an inconclusive relationship with the amount of external audit fees in prior studies. However, the auditee size seems to have been the key determinant of external audit fees. Furthermore, financial risk is found to be negatively and significantly associated with the level of external audit fees. On other side, empirical results found that the audit tenure has no significant relationship with audit fees. Finally, the current study is unique because it is the first to empirically examine factors impacting the level of audit fees in Jordan for a total of three years; it revisits the audit fee literature and highlights the important determinants that affect audit fees.

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Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Determinants of Audit Fees: Evidence from Jordan

Kikhia¹

2014

AFR

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“…Also, because of the role of internal controls in assuring the reliability of financial reporting, weak controls increase the scope of audit work required (Hogan and Wilkins 2008). Therefore, we examine whether material internal control weakness firms are more likely to be late filers than firms with effective internal controls.…”

Section: Hypothesesmentioning

confidence: 99%

Did accelerated filing requirements and SOX Section 404 affect the timeliness of 10-K filings?

et al. 2011

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This paper examines the effect of Sarbanes-Oxley provisions on 10-K filing delays. We find that tightened filing deadlines for accelerated and large accelerated filers are not associated with changes in the incidence of late filing. While Section 404 compliance does not affect filing timeliness for firms with effective internal controls, we find that about half the firms disclosing internal control weaknesses are late filers. As a consequence, many Section 404 material weakness firms experience negative abnormal returns around late filing notifications before filing the 10-K. Lastly, we find that market reactions to late filing notifications are more negative when management provides no meaningful explanation for the delay, consistent with managers' incentives to withhold bad news.

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“…Davis, Ricchiute, and Trompeter (1993) document that incremental audit effort is costly and reflected in audit fees. Hogan and Wilkins (2008) find that audit fees are higher for firms with internal control deficiencies. Thus, supply side factors related to managerial incentives could lead to higher audit fees for closed-end funds as well.…”

Section: Hypothesis Developmentmentioning

confidence: 84%

Managerial Incentives and Audit Fees: Evidence from the Mutual Fund Industry

Booth¹,

Booth

Deli

2012

AFR

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We examine the relation between audit fees and managerial incentives in the mutual fund industry. We find that audit fees are higher when managerial incentives with respect to reporting are poor. Our results suggest that the auditing profession, at least to some extent, recognizes the adverse incentives created by certain organizational and contracting arrangements and prices auditing services to reflect those adverse incentives.

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Evidence on the Audit Risk Model: Do Auditors Increase Audit Fees in the Presence of Internal Control Deficiencies?*

Cited by 550 publications

References 25 publications

Determinants of Audit Fees: Evidence from Jordan

Determinants of Audit Fees: Evidence from Jordan

Did accelerated filing requirements and SOX Section 404 affect the timeliness of 10-K filings?

Managerial Incentives and Audit Fees: Evidence from the Mutual Fund Industry

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