What Drives Differences in Audit Quality Across the Globe?

• In Event: Break and Research & Education Poster Forum

Abstract

Using a large international sample with firms from 28 countries, we explore audit quality across the globe to make inferences about various institutional settings related to country-level audit quality differences. After controlling for purchasing power and the economic development of each country, we still find surprisingly large differences in audit fees between different countries. Comparison of analyses based on our two measures of quality, audit fees and abnormal accruals, reveals interesting patterns. Whereas fees increase, as expected, with litigation risk and Big 4 market share, we cannot find any impact of these macro-level factors on accruals quality. However, trust in companies in society is negatively associated with both fees and accruals quality. Combined, the documented substantial variation in audit fees and abnormal accruals suggest significant differences in audit production and audit outcomes across the globe.

Authors

• Brigitte Eierle, University of Bamberg

• Sven Hartlieb, University of Bamberg

• David C Hay, The University of Auckland

• Lasse Niemi, Aalto University

• Hannu Ojala, Aalto University