AAA Spark Meeting of the Regions

iXBRL Adoption, Audit Fees, and Audit Effort

• In Event: Analyzing the Audit Process

Abstract

This study examines how inline XBRL (iXBRL) voluntary and mandatory adoption impacts audit fees and audit efforts. While iXBRL can make financial reporting information accessible to a wide range of external stakeholders, the presentation format change should have no impact on auditor behavior. However, audit firms note that presenting non-audited XBRL metadata on top of audited financial statements could lead to an expectation gap where external stakeholders believe that the inline tags have been audited despite no procedures being required. We find that both iXBRL voluntary and mandatory adoption are associated with higher audit fees. Upon further examination, we find that the increase in audit fees reflects more of a risk premium being placed on iXBRL clients rather than increased audit effort, as audit quality does not necessarily improve following adoption. We provide timely information on how auditors respond to iXBRL adoption.

Authors

• Yiyang Zhang, Youngstown State University

• Stephanie Walton, Louisiana State University

• Adi Masli, The University of Kansas

• Mengmeng Wang, The University of North Carolina at Greensboro