Assurance news: Rotation leading to lower audit fees in Europe
The U.S. Public Company Accounting Oversight Board (PCAOB) had been considering requiring mandatory audit firm rotation, but has been discouraged by a European trend towards lower audit fees since the European Parliament approved mandatory rotation. Audit fees seem to have dropped between 20-40% in Europe - with the UK being an exception to this.
All they survey
The article examines the impact of the changes to auditor-client relationships on audit fees. It outlines the auditing rules implemented by the Competition Commission of Great Britain and European Union (EU). It discusses issues on the strategy of accounting firms in bidding or tendering audit contracts, purchasing power of audit firms, corporate governance code revisions, and auditor switches by companies as a result of the regulations and as an expression of good corporate governance.
CEO turnover and audit pricing
This study examines the relationship between CEO turnover in client companies and the fees charged by their audit firms. The authors propose that forced CEO turnover (such as dismissals) pose higher business and audit risks for the audit firm than voluntary turnover (such as retirements); further, greater risk leads to higher audit prices. They develop a regression model of audit fees. Results reveal that companies with forced CEO turnover have significantly higher audit fees than companies with either voluntary turnover or no turnover.
Articles and books in the Library collection
Click on the links below to see our catalogue record for each article.
Scaling the FTSE 100
Accountancy, November 2014, pages 8-14
The Big Four still have a firm hold on the top 100 audtis but mid-tier firms are trying hard to ensure a fair contest. Includes the table FTSE 100 auditors survey 2013/14, tables companies ranked by audit value; constituent members FTSE 100 (in/out) and post-annual report auditor switches.
Does corporate tax aggressiveness influence audit pricing?
Contemporary Accounting Research, Spring 2014, pages 84-308
The authors evaluate whether, and under what circumstances, corporate tax aggressiveness influences audit pricing. Using a compound measure of two long-run effective tax rates, they find that tax-aggressive firms pay higher fees for external audit services after controlling for factors related to earnings management. Overall, the evidence implies firms' aggressive tax behaviour, tax services provider, and auditor expertise interact to influence the pricing of auditing engagements.
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