{"title":"Auditors’ sensitivity to business risk under business risk auditing","authors":"Huihui Shen , Liansheng Wu , Jason Zezhong Xiao","doi":"10.1016/j.jaccpubpol.2023.107113","DOIUrl":null,"url":null,"abstract":"<div><p>This study uses Chinese data and a difference-in-differences design to investigate the effect of the adoption of business risk auditing (BRA) on auditors’ sensitivity to business risk. We find that BRA adoption has an incremental positive effect on the relationship between business risk and audit hours in non-state-owned enterprises (NSOEs) but not in state-owned enterprises (SOEs). This result suggests that BRA increases auditors’ sensitivity to business risk in NSOEs. This effect is more pronounced when a client firm has a more complex business or the auditor is a non-Big10 domestic audit firm. The results of further tests show that an increase in audit hours due to BRA adoption results in an improvement in audit quality in NSOEs but not in SOEs. In addition, BRA adoption also has an incremental positive effect on the relationship between business risk and audit fees in NSOEs but not in SOEs.</p></div>","PeriodicalId":48070,"journal":{"name":"Journal of Accounting and Public Policy","volume":null,"pages":null},"PeriodicalIF":3.3000,"publicationDate":"2023-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Accounting and Public Policy","FirstCategoryId":"91","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S0278425423000625","RegionNum":3,"RegionCategory":"管理学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"BUSINESS, FINANCE","Score":null,"Total":0}
引用次数: 0
Abstract
This study uses Chinese data and a difference-in-differences design to investigate the effect of the adoption of business risk auditing (BRA) on auditors’ sensitivity to business risk. We find that BRA adoption has an incremental positive effect on the relationship between business risk and audit hours in non-state-owned enterprises (NSOEs) but not in state-owned enterprises (SOEs). This result suggests that BRA increases auditors’ sensitivity to business risk in NSOEs. This effect is more pronounced when a client firm has a more complex business or the auditor is a non-Big10 domestic audit firm. The results of further tests show that an increase in audit hours due to BRA adoption results in an improvement in audit quality in NSOEs but not in SOEs. In addition, BRA adoption also has an incremental positive effect on the relationship between business risk and audit fees in NSOEs but not in SOEs.
期刊介绍：
The Journal of Accounting and Public Policy publishes research papers focusing on the intersection between accounting and public policy. Preference is given to papers illuminating through theoretical or empirical analysis, the effects of accounting on public policy and vice-versa. Subjects treated in this journal include the interface of accounting with economics, political science, sociology, or law. The Journal includes a section entitled Accounting Letters. This section publishes short research articles that should not exceed approximately 3,000 words. The objective of this section is to facilitate the rapid dissemination of important accounting research. Accordingly, articles submitted to this section will be reviewed within fours weeks of receipt, revisions will be limited to one, and publication will occur within four months of acceptance.
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