Download or read book Are Family Firms More Audit Risky Analyzing Audit Fees Hours and Rates written by Menachem (Meni) Abudy and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine differences in audit scope between family and non-family firms in Israel, using a unique database that includes both external and internal audit fees, hours, and billing rates. Consistent with prior literature, we argue that the number of audit hours reflects an auditor's effort, and the hourly rate reflects the auditor's risk premium. We find that external auditors exert less effort and charge lower hourly rates for family firm engagements than for non-family firm engagements. Moreover, internal audit efforts are lower in family firms than in non-family firms. Using a sub-sample of firms that switched from family to non-family status and vice-versa, we provide evidence on the causal relationship between family firm status and the scope of the audit. Our results mean that auditors reduce the scope of the audit in family firms because they perceive these firms to be less audit-risky. Nevertheless, we find that the reporting quality of family firms is higher than that of non-family firms.

Download or read book Industry Specialist Auditors and Audit Fees in Family Firms written by Fei Kang and published by . This book was released on 2012 with total page 87 pages. Available in PDF, EPUB and Kindle. Book excerpt: I examine whether and how family firms' unique ownership structure and agency problems affect their choice of industry-specialist auditors and the level of audit fees. Following prior literature, I define family firms as those in which members of the founding family continue to hold positions in top management, sit on the board, or are blockholders. Compared to non-family firms, family firms are subject to less severe Type I agency problems due to family owners' long-term horizon and close monitoring of managers, but face more severe Type II agency conflicts due to the concentrated ownership and excess of control rights over cash flow rights held by family owners. Using data from the S & P 1500 firms, I find that family firms are more likely to appoint industry-specialist auditors and incur lower audit fees than non-family firms. The results suggest that family firms have strong incentives to hire industry specialists to signal the quality of their financial reporting due to the Type II agency problems, and that they have lower assessed audit risk and less demand for external audit services due to the mitigated Type I agency problems. My additional analysis shows that, compared to family firms without dual-class shares, family firms with dual-class shares have higher demand for industry-specialist auditors to signal firms' disclosure quality. Furthermore, my results indicate that, when family members serve as CEOs, firms have a stronger tendency to hire industry specialists and to pay lower audit fees. In addition, although family firms have a higher likelihood of hiring industry-specialist auditors than non-family firms, I find no evidence that family firms purchase more non-audit services from their incumbent auditors.

Download or read book Auditor Choice and Audit Fees in Family Firms written by Joanna L.Y. Ho and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine auditor choice and audit fees in family firms using data from Standard & Poor's (S&P) 1500 firms. We find that, compared to non-family firms, family firms are less likely to hire top-tier auditors due to the less severe agency problems between owners and managers. Our results also show that family firms, on average, incur lower audit fees than non-family firms, which is driven by family firms' lower demand for external auditing services and auditors' perceived lower audit risk for family firms. Our additional analysis indicates that the tendency of family firms to hire non-top-tier auditors and to pay lower audit fees is stronger when family owners actively monitor their firms.

Download or read book Assessing Financial Reporting Quality of Family Firms written by Aloke Ghosh and published by . This book was released on 2019 with total page 48 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze audit fees and audit risk to extract auditor's assessment of family firms' financial reporting quality. Relative to non-family firms, we find that auditors charge significantly less from family firms and the fee difference shrinks in magnitude when family firms have high audit risk. Using constructs for audit risk and audit effort, we show that family firms have lower audit risk and that their auditors work less to provide assurance. Our findings suggest that superior reporting quality lowers audit risk and the need for greater audit investments, which is why auditors charge less from family firms.

Download or read book Do Family Firms Pay More Attention to Audit Fees and Audit Choices Than Non Family Firms written by Javad Izadi and published by . This book was released on 2023 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: PurposeThe main aim of this paper is to examine auditor choice and audit fees in family firms on the Tehran Stock Exchange.Design/methodology/approachThe hypotheses set are tested by analysing all firms except financial firms listed on the Tehran Stock Exchange for the period of 10 years, using a sample of 1,050 firm-year observations. Probity and ordinary least squares regression (OLS) is used to investigate the associations proposed in the research hypotheses.FindingOur findings show that in family firms, in contrast with non-family firms, the large auditor is less often selected as the firm's auditor. The findings also show that family firms pay higher fees for their audits in comparison with non-family firms and show that the choice of a large auditor reduces the relationship between family ownership and audit fee. The additional analysis shows that choosing industry specialist auditors is less likely in family firms compared to non-family firms.Practical implicationsThe importance of this research is in the increased awareness for researchers and users about family ownership and the selection of auditors and audit fees in the emerging market capitalization of Iran. This research contributes to the accounting literature by providing empirical evidence of the effects of family control and ownership on audit pricing and auditor choice in a developing economy context. Also, this research can provide a new route for research on this issue in developing countries, e.g., Iran.Originality/valueThese findings were discovered by means of the financial data in the particular environmental conditions of Iran which differ from the features and conditions for institutional investors in developed countries.

Download or read book Audit Fees in Family Firms written by Chiraz Ben Ali and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Family businesses are an important part of the world economy (Anderson and Reeb, 2003) and differ considerably from non-family firms with regard to corporate governance. However, despite their difference, family businesses have received relatively little research attention. Our study contributes to this growing research by empirically investigating the relationship between family shareholding and audit pricing. Using a sample of 3,291 firm-year observations of major U.S. listed companies, for the 2006-2008 period, our results demonstrate that audit fees are negatively associated with family shareholding after taking into account time-varying effects and industry effects as well as traditional control variables. The empirical results are robust to alternative family shareholding measures and estimation model specifications. Our results are consistent with the convergence-of-interests hypothesis suggesting that family firms face lower manager/shareholders agency costs. Auditors charge lower fees for family firms because of lower information asymmetry and risk given that the controlling family is well informed about the firm and is better able to monitor managerial decisions.

Download or read book Research Opportunities in Internal Auditing written by and published by Institute of Internal Auditors, Incorporated. This book was released on 2004-01-01 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Includes contributions by eleven academics writing on the past, present, and future of internal auditing. Focus is on the identification of internal audit topics that could raise interest in internal audit research.

Download or read book Audit Fees Auditor Choice and Stakeholder Influence written by Arifur Khan and published by . This book was released on 2015 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: Despite the dominance of family-owned publicly listed companies in developing economies, prior research has paid relatively little attention to this area, and the socio-economic context of these countries has been mostly ignored. This study contributes to the accounting literature by providing empirical evidence of the effects of family control and ownership on audit pricing and auditor choice in a developing economy context. Using 1,058 firm-year observations of publicly listed companies in Bangladesh, where family firms are the most dominant form of public companies, we determine that in comparison with non-family firms, our sample family firms pay significantly lower audit fees and tend to choose lower quality auditors. However, for export oriented industries, family firms seem to pay significantly higher audit fees and recruit better quality auditors compared to non-family firms, indicating stakeholder power. Collectively, our findings have important implications for audit markets in emerging economies in which the sustainability of family firms is crucial for overall economic development.

Download or read book The Risk of Fraud in Family Firms written by Gopal V. Krishnan and published by . This book was released on 2017 with total page 47 pages. Available in PDF, EPUB and Kindle. Book excerpt: There is a dearth of business ethics research on family firms, despite the importance of such firms to the U.S. economy (Vazquez 2016). We answer Vazquez's (2016) call to examine the intersection of family firms research and business ethics, by investigating whether external auditors assess higher risk of fraud in family firms. We test the contradictory predictions of two dominant theoretical perspectives in family-firm research -- entrenchment theory and alignment theory. We conduct an experiment with highly experienced external audit professionals, who assess the risk of fraud and make client acceptance decisions for family firms versus non-family firms with different strength of corporate governance: strong versus weak audit committees (AC). We find that auditors assess the risk of fraud as higher for family firms than for non-family firms, consistent with the predictions of entrenchment theory. Auditors are also less likely to make client acceptance recommendations for family firms. The strength of the AC moderates the family-firm effect, whereby auditors assess family firms with weak ACs to have the highest fraud risk, and to be the least desirable audit clients. Our findings suggest that auditors perceive more severe agency conflicts to be present in family firms than in non-family firms, consistent with entrenchment theory, according to which family members may behave opportunistically to extract rents and potentially expropriate the firm's resources at the expense of minority shareholders.

Download or read book Client Acceptance and Engagement Pricing Following Auditor Resignations in Family Firms written by Samer Khalil and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates whether auditors' client acceptance and pricing decisions following the resignation of the incumbent auditor in family firms are significantly different from those in non-family firms. Relying on the auditing literature (client acceptance and audit pricing) and using insights from the agency theory, we document that successor auditors incorporate a firm's ownership structure into their acceptance and pricing decisions following the resignation of the incumbent auditor. Big4 auditors are more likely to serve as successor auditors following auditor resignations in family firms as opposed to non-family firms. The changes in audit fees following auditor resignations in family firms, however, are significantly smaller than those in non-family firms. These results hold when we account for whether a family firm is managed by a founder, a descendant, or by a professional manager, and when we use the percentage of shares held by the family members as another proxy for family ownership. Additional analysis further demonstrates that the likelihood of financial restatements in family firms in the post-resignation period are significantly lower than those in non-family firms. Overall, our findings suggest that Big4 auditors perceive family firms from whom the incumbent auditors resigned as being less risky than their non-family counterparts.

Download or read book Accounting Choices in Family Firms written by Silvia Ferramosca and published by Springer. This book was released on 2018-03-13 with total page 276 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book provides a critical analysis of the current state of knowledge on the relationship between family firms and a wide range of accounting choices, including earnings management, accounting conservatism, and financial and non-financial disclosure. In examining the choices made in family firms, the authors explore and elucidate the relevance of agency, socioemotional wealth, stewardship, and resource-based theories. Readers will also find close consideration of the impacts of a country’s culture and societal values on accounting choices. In particular, further evidence is provided on the impact of different cultures on accounting conservatism in family businesses. Finally, avenues for future accounting research on family firms are discussed, highlighting theoretical and empirical challenges. In addition to offering a revealing analysis of the influence of ownership types and cultures on accounting choices within family firms, the book identifies significant practical implications for the management of family firms and policy implications for regulators and standard setters.

Download or read book Government Auditing Standards 2018 Revision written by United States Government Accountability Office and published by Lulu.com. This book was released on 2019-03-24 with total page 234 pages. Available in PDF, EPUB and Kindle. Book excerpt: Audits provide essential accountability and transparency over government programs. Given the current challenges facing governments and their programs, the oversight provided through auditing is more critical than ever. Government auditing provides the objective analysis and information needed to make the decisions necessary to help create a better future. The professional standards presented in this 2018 revision of Government Auditing Standards (known as the Yellow Book) provide a framework for performing high-quality audit work with competence, integrity, objectivity, and independence to provide accountability and to help improve government operations and services. These standards, commonly referred to as generally accepted government auditing standards (GAGAS), provide the foundation for government auditors to lead by example in the areas of independence, transparency, accountability, and quality through the audit process. This revision contains major changes from, and supersedes, the 2011 revision.

Download or read book Litigation Risk and Audit Fees written by Paul J. Beck and published by . This book was released on 2013 with total page 61 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using D&O insurance premia from the 2001-2004 Tillinghast D&O insurance surveys as a proxy for litigation risk, we show that audit fees are positively associated with litigation risk even after controlling for several quantitative risk factors known to influence both the insurance premium and audit fee. We attribute this positive association to the parallel development of risk assessment expertise by both D&O insurers and auditors and to their overlapping sources of qualitative risk information. The significant association between D&O premia and audit fees also provides external validation for the auditor's risk assessment process. Finally, we partition accounting firms based on their audit methodologies and find that the audit fees charged by risk-based auditors are more strongly associated with litigation risk than those charged by firms using more traditional audit approaches.

Download or read book An Analysis of Audit Fees Following the Passage of Sarbanes Oxley written by Paul A. Griffin and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study analyzes audit fees following SOX, in particular, the residual increase in audit fees controlling for those factors predicted to change such fees but for the Act. We find significant relations between residual audit fees and incremental audit risk, audit effort, and auditor changes. These factors are noticeably more influential in the period following SOX that includes the implementation of section 404 on internal control. Our results imply that SOX most likely caused an increase in the auditing profession's share of the risk of defective financial statements and client companies' resources to audit a costlier accounting system.

Download or read book Fair Value Management Discretion and Audit Fees written by Muhammad Shahin Miah and published by . This book was released on 2019 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The main objective of this study is to investigate the impact of complexity resulting from fair value adoption on audit fees. Using a sample of 9619 firm-year observations from USA, this study finds that auditors charge higher audit fees for firms exposed to higher level of complexity due to fair value adoption. More specifically, this study focuses on research and development expenditure, intangibles, goodwill, and property, plant and equipment to compute the intensity of complexity as these items are heavily affected by the fair value which is subject to management discretion. The results suggest that the greater level of complexity arising from the above sources increase auditors' efforts and risks level, thereby, results in higher audit fees. Further analysis, however, shows that auditors do not charge additional audit fees for complexity arising from goodwill if they have intangibles. It is because of economies of scale by auditors, they design their audit program which covers goodwill audit when they do audit for intangibles. Overall, the results support the proposition that judgemental or discretionary choice available for management increases audit risks, and auditors, to compensate higher risks, charge greater audit fees.

Download or read book Ownership Structure Related Party Transactions and Firm Valuation written by Amrinder Khosa and published by Cambridge University Press. This book was released on 2019-03-21 with total page 194 pages. Available in PDF, EPUB and Kindle. Book excerpt: Concentrated ownership is considered to be the best protection for shareholders in economies where legal protection is relatively weak. This book investigates and concludes, for Indian business groups, that concentrated-inside ownership provides opportunities for the expropriation of minority shareholders. While more concentrated direct ownership of controlling families results in a higher market value of equity, indirect ownership obtained through cross-holding provides incentives to extract private benefits and results in value loss. This finding requires the prompt attention of regulatory bodies, outside investors and other interested parties. This book examines the effect of ownership structure and disclosure of related-party transactions on firm valuation of group-affiliated firms in India, by using a sample of 317 listed firms comprising 1350 firm-year observations from 2008 to 2017. Well-accepted value-relevance models are employed to examine the effect of ownership rights on market value of equity and valuation effect of RP trading, asset transfer, investment and loan transactions.

Download or read book The Benefits and Costs of Group Affiliation written by Stijn Claessens and published by . This book was released on 2002 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the benefits and associated agency costs of using internal capital markets through affiliating with groups using data of two thousand firms from nine East Asian economies between 1994-96. We find that mature and slow-growing firms with ownership structures more likely to create agency problems gain more from group affiliation, while young and high-growth firms more likely lose. Agency problems are important explanatory factors of firm value in economies outside Japan, but less so in Japan. Consistent with the literature, financially-constrained firms benefit from group affiliation. Our results are robust to different time periods and estimation techniques.