The Impact of Fair Value Measurement on Audit Fees: Evidence from Financial Institutions in 24 European Countries

Alexeyeva, Irina; Mejia-Likosova, Margarita

doi:10.1111/ijau.12075

Cited by 22 publications

(54 citation statements)

References 50 publications

(158 reference statements)

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“…However, not all studies considered in our literature analysis aim to investigate the direct effect of institutional attributes on auditing. Instead, some examine the moderating role of such country factors on documented associations in audit practice (e.g., Alexeyeva & Meijka‐Likosova, 2016; Kuo & Lee, 2018). These studies deepen our understanding of how country factors affect auditor behaviour and, in turn, audit pricing.…”

Section: Potential Country‐level Determinants Of Audit Fees: Review Of Prior Cross‐country Literaturementioning

confidence: 99%

Importance of country factors for global differences in audit pricing: New empirical evidence

et al. 2021

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In recent years, we have seen an increasing interest in the country‐level differences in audit environments as they might have a pervasive impact on how financial statement audits are conducted around the world. We contribute to this emerging stream of research in three important ways. Firstly, we provide a comprehensive synthesis of country‐level determinants that have been employed in previous multinational auditing research. Secondly, we document economically significant differences in the overall levels of audit pricing between countries, which we interpret as a compelling evidence that audits are conducted differently in different countries. Lastly, we explain these pricing differences between countries with a large set of country variables identified in our synthesis of prior multinational auditing research. We find not only that economic and regulatory characteristics explain the most of the differences in audit pricing between countries but also that differences attributable to sociological characteristics seem to be important in the conduct of audits. As auditing as a service and profession has become increasingly globalized, our study should be of interest to a wide range of readers including researchers, practitioners and regulators.

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Section: Potential Country‐level Determinants Of Audit Fees: Review Of Prior Cross‐country Literaturementioning

confidence: 99%

Importance of country factors for global differences in audit pricing: New empirical evidence

et al. 2021

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show abstract

“…For example, Ettredge, Xu, and Yi () showed that there is a fee premium for auditing the fair values that increases with the estimation uncertainty. Alexeyeva and Mejia‐Likosova () and Yao, Percy, and Hu () presented similar evidence for European and Australian datasets respectively . By using the abnormal audit fees, we investigate the bank‐specific fee premium that the auditor charges on top of the average fee premium (the firm‐specific discount on the average fee premium) and control for several other distorting effects…”

Section: Background and Hypotheses Developmentmentioning

confidence: 64%

“…This model uses the audit fees as a function of the bank's attributes of size; credit, market, liquidity, business, and capital risks; and auditor‐specific variables. We follow Ettredge et al () and Alexeyeva and Mejia‐Likosova () and extend this model by adding the proportion of the fair‐value assets at each level of the fair‐value hierarchy . In including fair‐value variables in the audit fee model, we assume that the fee premium can be separated into two components.…”

Section: Empirical Methodsmentioning

confidence: 99%

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Fool's gold or value for money? The link between abnormal audit fees, audit firm type, fair‐value disclosures, and market valuation

2019

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We analyze whether the audit firm type and abnormal audit fees are associated with the market valuation of banks' fair‐value assets. Our results indicate that different auditor types use different strategies when auditing fair values. First, we show that Big 4 auditors restrict the Level 3 valuations to the most illiquid assets. Thus, those banks audited by a Big 4 auditor have a lower proportion of Level 3 assets. Second, the market discount on the Level 3 assets is higher for the banks audited by a Big 4 auditor than for those audited by a non‐Big 4 auditor. Third, the discount on the Level 3 portfolios of banks with non‐Big 4 auditors is higher if the unexpected audit fees are high. Thus, non‐Big 4 auditors seem to allow more high‐uncertainty valuations but charge a risk premium. We find similar effects for industry‐specialist auditors.

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“…We source audit fees and firm-specific financial data from the Thom- We begin with an initial sample of 251,834 firm-year observations with non-missing audit fees data from 44 countries spanning 2001 to 2017. We drop 24,234 (4,874) firm-years from the financial (utility) industries based on the four-digit Global Industry Classification Standards (GICS), because the audit fee determinants for such industries are distinct (e.g., Alexeyeva & Mejia-Likosova, 2016). We derive a sample of 164,964 firm-year observations after merging with the organization capital database.…”

Section: Data and Samplementioning

confidence: 99%

Organization capital and audit fees around the world

2020

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We examine whether auditors consider organization capital in audit pricing decisions. Utilizing an international sample from 40 countries spanning the period 2001-2017, we find that firms with high levels of organization capital pay high audit fees: a finding that is consistent with both the risk-and the agency-based arguments for audit pricing. Additionally, our results indicate that the positive relationship between organization capital and audit fees is reinforced in firms with pronounced business risks and agency problems, whereas it is relatively weak in countries with protective employment legislation. Our study contributes to the voluminous literature on the determinants of audit fees by showing that auditors price the risks related to clients' intangible assets, especially those embodied in a firm's key talents. Our study also contributes to the scarce literature on the effects of organization capital in international markets.

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The Impact of Fair Value Measurement on Audit Fees: Evidence from Financial Institutions in 24 European Countries

Cited by 22 publications

References 50 publications

Importance of country factors for global differences in audit pricing: New empirical evidence

Importance of country factors for global differences in audit pricing: New empirical evidence

Fool's gold or value for money? The link between abnormal audit fees, audit firm type, fair‐value disclosures, and market valuation

Organization capital and audit fees around the world

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