Impact Of Religiousity On Audit Effort

• In Event: Continental Breakfast and Research & Education Forum
  In Paper Session: Table 2: Audit Quality I

Abstract

In this study, we document that auditors influenced by high religiosity environment prefer to avoid high risk clients and this results in lower audit effort, which is reflected in lower audit fees. The results based on the ARDA and Gallup Poll religiosity databases show a significantly negative association between audit fees and religiosity values of counties in which auditors’ offices are located, confirming that higher religiosity values result in lower audit effort which is reflected by lower audit fees. Additional tests are conducted to examine whether our results are influenced by higher earnings quality, lower firm-specific risks, or high social capital values. The results of these tests show that our main findings hold even after we control for these factors. The results of several sensitivity tests also show that our findings are robust. Moreover, we find that the negative association between audit fees and religiosity values is especially stronger when auditors’ offices are located in rural high religiosity areas than urban high religiosity areas.

Author

• Christine Xin, University of Louisville