Auditors’ Strategic Audit Pricing:Evidence from the Pre- and Post-IFRS Periods

Choi, Sun Hwa and Choi, Youn-Sik and Kim, Bum-Joon (2017) Auditors’ Strategic Audit Pricing:Evidence from the Pre- and Post-IFRS Periods. Auditing: A Journal of Practice and Theory. ISSN 0278-0380

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Abstract

This study examines the audit pricing by the auditor of a parent company (i.e., principal auditor) when other independent auditors who are not affiliated with the principal auditor (i.e., other auditors) are involved in the audit of the group financial statements. Using Korean data, we find that audit fees charged to the parent company by the principal auditor are negatively associated with the proportion of total assets or sales of subsidiaries audited by other auditors in the pre-IFRS period. This finding is consistent with the argument that the principal auditor views subsidiaries audited by other auditors as a business opportunity to attract new clients and thus offers fee discounts to its client. However, in the post-IFRS period, this negative relation between audit fees and the involvement of other auditors becomes insignificant or positive, suggesting that IFRS adoption restricts auditors' strategic behavior in audit pricing because IFRS adoption increases the audit complexity and risk associated with the involvement of other auditors.

Item Type:
Journal Article
Journal or Publication Title:
Auditing: A Journal of Practice and Theory
Uncontrolled Keywords:
/dk/atira/pure/subjectarea/asjc/1400/1402
Subjects:
ID Code:
88259
Deposited By:
Deposited On:
16 Oct 2017 10:36
Refereed?:
Yes
Published?:
Published
Last Modified:
01 Jan 2020 10:29