The Impact of Client Information Technology Capability on Audit Pricing Elements: Examining Risk, Complexity and Size

• In Event: Information Technology / Behavioral

Abstract

This paper explores the question: How does a client’s IT capability systematically impact the key elements of audit pricing – risk, complexity and size? It employs data on companies that are listed on the InformationWeek 500 from 2004 to 2012 as a proxy for firms with superior IT resources. Controlling for factors found in prior research to influence audit fees, evidence suggests that companies with superior IT capability enjoy overall lower levels of audit fees. However, superior IT capability positively moderates the impact of size. This suggests that auditors expect additional effort/cost for larger clients with advanced IT capability. We find no moderation effect with respect to risk and complexity. The implications of these findings and opportunities for additional research are discussed.

Authors

• Benjamin Hoffman, Kent State University - Kent

• R. Drew Sellers, Kent State University - Kent

• Justyna Skomra, Kent State University