Inherent Agency Conflict Built Into The Auditor Remuneration Model

Abstract

<jats:p>This paper provides a model for audit market interventions. The study asks whether interventions in the audit market result in excessive premiums at the cost of quality and independence. The model was tested based on a historical data sample of 1,927 companies’ fiscal year financial statements, observed for the period 2010–2013. The testing strategy combined statistical analysis of the market concentration and regression of abnormal results. The findings do not support, for the Polish market, the conclusion that the audit market is used as a leverage for consulting services. This paper discusses possibilities of systematic risk for policymakers as a result of the negative interaction between regulated and non-regulated markets.</jats:p>

Audit fee and banks’ communication sentiment

“…A combination of trends, visible on Graph 1, and the instability of the results in terms of yearly effects indicates that sentiment might be driven by the status of the general economy more than by conscientious auditor behaviour. Even if the auditor remuneration model suffers inherent limitations (Morawska & Staszkiewicz, 2016), the significant and different individual auditor's effects in regression contradict the risk of an adverse impact of concentration on market pricing mechanisms. Our results indicate that the audit fees of the BigN companies react less to sentiment than other audit firms and as such the reaction is not significant almost in all possible specifications.…”