The Regulation of Public Company Auditing: Evidence from the Transition to AS5

• 成果类型: Article
• 署名作者: Doogar, Rajib; Sivadasan, Padmakumar; Solomon, Ira
• 署名单位: University of Illinois System; University of Illinois Chicago; University of Illinois Chicago Hospital
• 刊物名称: JOURNAL OF ACCOUNTING RESEARCH
• ISSN/ISSBN: 0021-8456
• DOI: 10.1111/j.1475-679X.2010.00380.x
• 发表日期: 2010
• 页码: 795-814
• 关键词: liability regimes; BUSINESS RISK; fees; MARKET; services

摘要

The replacement of Auditing Standard No. 2 (AS2) by Auditing Standard No. 5 (AS5) creates a natural experiment that sheds light on (1) potential inefficiencies caused by regulatory responses to a political crisis and (2) audit efficiency and effectiveness improvements resulting from the risk-based approach embodied in AS5. We study these effects by examining the impact of AS5 on audit fees. We find that AS5 audit fees are aligned with auditee fraud risk, but not AS2 audit fees. Second, relative to AS2 benchmark levels, AS5 audit fees are, on average, lower for all auditees. Third, relative to AS2 benchmarks, AS5 fees are lower for lower-fraud-risk auditees but greater for higher-fraud-risk auditees. Overall, the evidence is consistent with (1) initial overregulation (via AS2) followed by reform (via AS5) and (2) auditors deploying a risk-based audit approach to obtain both efficiency and potential effectiveness gains in audit production.