The Effects of Business Risk on Audit Pricing

The Effects of Business Risk on Audit Pricing This paper examines the pricing of business risk by homogeneous auditors in a two period model. Incumbent auditors learn the client's business risk type during the course of the engagement. They subsequently compete in prices with prospective auditors. In such an environment, we show that equilibrium audit fees do not fully reflect the cost of business risk. Moreover, there exists differential auditor turnover between high and low risk firms; cross-subsidization of the audit fees of high risk firms by low risk firms; and low-balling by auditors. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Accounting Studies Springer Journals

The Effects of Business Risk on Audit Pricing

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 1998 by Kluwer Academic Publishers
Subject
Business and Management; Accounting/Auditing; Corporate Finance; Public Finance
ISSN
1380-6653
eISSN
1573-7136
D.O.I.
10.1023/A:1009687101871
Publisher site
See Article on Publisher Site

References

  • Asymmetric All-Pay Auctions
    Amann, E.; Leininger, W.

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