Final published version
Research output: Contribution to Journal/Magazine › Journal article › peer-review
Research output: Contribution to Journal/Magazine › Journal article › peer-review
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TY - JOUR
T1 - Auditors’ Strategic Audit Pricing
T2 - Evidence from the Pre- and Post-IFRS Periods
AU - Choi, Sun Hwa
AU - Choi, Youn-Sik
AU - Kim, Bum-Joon
PY - 2017/11/2
Y1 - 2017/11/2
N2 - 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.
AB - 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.
U2 - 10.2308/ajpt-51964
DO - 10.2308/ajpt-51964
M3 - Journal article
JO - Auditing: A Journal of Practice and Theory
JF - Auditing: A Journal of Practice and Theory
SN - 0278-0380
ER -