The Effect of Comparability on Audit Production

• In Event: Technology, Financial Reporting, and Audit Efficiency

Abstract

The citation of comparability as a primary reason for the development of accounting standards underscores the importance of this construct. However, in documenting the benefits of comparability, the extant literature has largely focused on a single group, financial statement users. Distinct from prior research, this study examines the impact of comparability on the parties involved in the production of audited financial statements. The results provide evidence of a negative association between comparability and audit fees, suggesting the cost of completing an audit is lower for comparable firms. The fee reduction is greatest when comparability is measured among clients of a single auditor, consistent with comparability increasing auditor efficiency through knowledge sharing and cost allocation.

Authors

• Jonathan Nash, Florida State University

• Landon Mauler, Florida State University

• Allen D. Blay, Florida State University