Is there a relation between audit fee cuts during the global financial crisis and banks’ financial reporting quality?

Krishnan, Gopal V.; Zhang, Yinqi

doi:10.1016/j.jaccpubpol.2014.02.004

Cited by 70 publications

(65 citation statements)

References 19 publications

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“…Thus our hypothesis is rejected. However, it is in line with existing empirical evidence in the US, reporting that the outbreak of the financial crisis negatively affected audit fees (Krishnan & Zhang, 2014;McCann, 2010).…”

Section: Resultssupporting

confidence: 88%

“…The results are not congruent with our expectations of increased audit fees as a result of increased audit engagement in times of financial crisis, the hypothesis that has been confirmed in existing literature for the sample of listed Australian companies in a high litigation risk environment (Xu et al, 2013) and for the export oriented Chinese listed companies (Zhang & Huang, 2013), that were most severely affected by the crisis. On the contrary, using the fixed effects panel model as the most contemporary tool to estimate panel data of such specifics, our study provides evidence that financial crisis negatively affected audit fees in Slovenia, a finding that is in line with existing US evidence (Krishnan & Zhang, 2014;McCann, 2010).…”

Section: Discussionsupporting

confidence: 86%

“…We studied the audit fees of all non-listed large and medium-sized Slovenian manufacturing companies (Industry C from the Slovenian Standard Classification of Activities -SKD) that presented audited financial statements in the years 2007 to 2012. In the selection process we considered the proposition that, from a research design standpoint, focusing on a single industry offers some advantages (Krishnan & Zhang, 2014). These include avoidance of problems of control for confounding differences (such as in risk) related to inter-industry comparison (Simunic, 1980) and differences in drivers of audit fees in specific subsamples such as the financial sector (Fields, Fraser, & Wilkins, 2004).…”

Section: Research Design and Empirical Resultsmentioning

confidence: 99%

“…Similarly, Whitehouse (2010) reports a fall in audit prices for the Standard & Poor's 500 companies with a median decline of 5.4% from 2008 to 2009. Moreover, for the period 2008-2009 Krishnan and Zhang (2014) report cuts in audit fees in 32% of the banking sector. On the other hand, Xu et al (2013) find evidence of increased audit fees during the period 2008-2009 compared with the period 2005-2007 on a sample of Australian listed companies.…”

Section: The Effect Of Financial Crisis On Audit Fees and The Developmentioning

confidence: 99%

See 3 more Smart Citations

Audit fees and the salience of financial crisis: evidence from Slovenia

Groff

Trobec

Igličar

2017

Economic Research-Ekonomska Istraživanja

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The financial crisis that has recently affected the EU economies created a research setting that enabled the examination of the effect of the financial crisis outbreak on audit fees by studying the deviation of audit fees in the post-crisis period as compared to the pre-crisis period. Financial crisis represents a setting that is tightly related to the concepts of audit risk and liability, where higher audit fees can be expected to account for increased audit engagement. The article identifies the characteristics of audit fees in Slovenia, a country with a relatively short auditing tradition. Since the establishment of the first audit firms in Slovenia in 1992, the number has consistently increased and reached 50 in 2007. This trend resulted in decreasing concentration and increasing price competition in the audit market for the large segment of non-listed companies. The aim of the article is to investigate the effect of the financial crisis on audit fees in Slovenia. Using the fixed effects panel model, our study provides evidence that financial crisis negatively affected audit fees in Slovenia. It seems that the negative effects on audit fees (reduced demand, increased competition and cost reduction measures) outweigh the opposing positive effect on audit fees resulting from increased audit engagement.

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Section: Resultssupporting

confidence: 88%

Section: Discussionsupporting

confidence: 86%

Section: Research Design and Empirical Resultsmentioning

confidence: 99%

Section: The Effect Of Financial Crisis On Audit Fees and The Developmentioning

confidence: 99%

See 2 more Smart Citations

Audit fees and the salience of financial crisis: evidence from Slovenia

Groff

Trobec

Igličar

2017

Economic Research-Ekonomska Istraživanja

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“…A UK study by Hassan et al (2014) shows that audit fees have increased in the 5 years following the mandatory adoption of IFRSs and as a result of the impact of the GFC, suggesting increased audit effort. Furthermore, these studies have used shorter periods to investigate the association between audit pricing and the GFC, either during the GFC period (Krishnan & Zhang, 2013) or during the periods before and during the GFC (Xu et al, 2013). None of these studies have examined how the auditor's industry specialization may have changed over the years in terms of its impact on audit pricing.…”

Section: The Changing Audit Environmentmentioning

confidence: 99%

Big 4 audit fee premiums for national‐ and city‐specific industry leadership in the UK: Additional evidence

Kharuddin

Basioudis

2017

Int J Auditing

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This study investigates the relationship between Big 4 auditor industry specialization and audit pricing in the UK in a period of many changes having taken place in the market for audit services. Using a large dataset between 2004 and 2011, our empirical results show a significantly higher fee premium for the Big 4 firms who are national industry leaders compared to city‐specific industry leaders, and that the fee premium for industry leadership is only earned by the city‐specific industry leaders if and when they are also the national leaders. Neither the national nor city level industry leadership alone is priced anymore in the UK audit market. These findings hold for the pre‐ and the post‐global‐financial‐crisis period only and for a number of additional analyses. The evidence suggests that the Big 4 industry leadership in the UK has moved away from the previously documented premium for the Big 4 city‐specific industry leadership alone, and is now driven solely by the joint Big 4 industry expertise at the national and city‐specific levels concurrently. The study's results indicate that there is a progression from city‐specific industry expertise to national‐specific industry expertise, and they imply that there has been an improvement in the sharing and transferability of industry knowledge and expertise among the city offices of the Big 4 firms in the UK in the period of investigation.

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The impact Dodd Frank's Act on audit firm tenure

Akono

2024

J Corp Accounting Finance

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This study examines the effect of Dodd Frank's Act of 2010 (Dodd's Act) on the duration of the auditor‐client relationship. One of the provisions of Dodd's Act was to permanently exempt nonaccelerated filers from mandatory internal control audits and to maintain the internal control requirement for accelerated filers. The results indicate that average audit firm tenure has increased significantly in the post‐Dodd period, and there is a post‐Dodd increase (decrease) in long and medium (short) tenure. Furthermore, the increase is more pronounced for nonaccelerated filers on average, and varies across big4 and non‐big4 auditors. The inferences are robust to the inclusion of various controls, and to the exclusion of the financial crisis period (2008–2010). Collectively, the findings suggest that Dodd's Act permanent exemption has resulted in lower margins for auditors, and thus motivated audit firms, particularly non‐big4 auditors, to extend their tenure with clients.

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Is there a relation between audit fee cuts during the global financial crisis and banks’ financial reporting quality?

Cited by 70 publications

References 19 publications

Audit fees and the salience of financial crisis: evidence from Slovenia

Audit fees and the salience of financial crisis: evidence from Slovenia

Big 4 audit fee premiums for national‐ and city‐specific industry leadership in the UK: Additional evidence

The impact Dodd Frank's Act on audit firm tenure

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