European Journal of Accounting, Auditing and Finance Research (EJAAFR)

EA Journals

audit firm characteristics

The Effect of the Characteristics of the Audit Firm and Client on the Application of the Business Risk Audit Approach (Published)

The purpose of this study is to identify the impact of certain fundamental characteristics of audit firms and their clients on the application of the business risk audit approach in Yemen, as well as to identify the responses implemented by these firms and companies to these characteristics. The study uses a descriptive-analytical approach, where the data collected through the questionnaire are described and analyzed using appropriate statistical methods. The study sample included 60 auditors from 42 audit firms and 8 individual offices, with a focus on larger offices and those associated with international audit offices, as they are more likely to apply the business risk-based audit approach. Data was sourced from the Ministry of Industry and Trade’s publications on licensed audit offices. Out of 50 electronic and 10 paper questionnaires distributed, 38 responses were received, representing a response rate of 63.33%. The results showed that the characteristics related to the audit firm have a varying impact on the application of the business risk audit approach and that the specialization of the audit firm in the client’s business is the most influential factor in this regard. The results also showed that the characteristics related to audit clients do not affect the application of the business risk audit approach, indicating the existence of other factors that may affect this approach. This study is one of the few studies that address the application of the business risk audit approach in the Yemeni context, highlighting the factors affecting this application and its challenges. The study also provides some recommendations to improve audit quality and deal with business risks.

Keywords: Audit client characteristics, Business risk audit approach, audit firm characteristics

Corporate characteristics, audit fees and the Nigerian corporate environment: a panel data approach (Published)

Around the globe, corporate units are concerned about what informs the fees charged by audit firms for audit services. Many factors have been advanced by extant literatures but limited discussion exist on the relationship between “audit firm and client” characteristics especially in Nigerian corporate sector. The objective of this study is therefore to determine the influence of corporate socio-economic characteristics on audit fees charged by distributive firms listed on the Nigerian Stock Exchange. Panel analysis was adopted for this study. Secondary data, been extracts from Annual Reports and Accounts of sampled firms were employed for this work. Audit fee and corporate socio/economic characteristics proxies by firm size, leverage, firm type, board size, profitability and board independence were analyzed using Panel regression. The study found a positive significant effect of Firm Size (FS), Audit Firm Type (AUDTYPE), Board Independence (BDIND) and Profitability (PROFIT) (β = 17.2545; 7862.6861; 84246.5114, 0.0005, ρ > 0.0000) while Leverage (LEV) and Board Size (BDSIZE) had negative effect on Audit Fees (β = -19.5350, -2333.0214, ρ > 0.0000). The study recommended that audit clients of distributive firms should focus on the management of the relationship between Asset and Liability i.e. leverage such that the current profitability tempo could be maintained and offset audit fee without any significant negative effect on audit quality.

Keywords: Audit Fees, audit firm characteristics, corporate characteristics, corporate environment

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