Abstract

http://ssrn.com/abstract=1984897
 


 



Client-Auditor Supply Chain Relationships, Audit Quality, and Audit Pricing


Karla M. Johnstone


University of Wisconsin - Madison - Department of Accounting and Information Systems

Chan Li


University of Pittsburgh

Shuqing Luo


National University of Singapore (NUS)

December 13, 2011


Abstract:     
We investigate the effect of auditors’ supply chain expertise at the city-level on supplier companies’ audit quality and audit pricing. We find that auditors’ supply chain expertise at the city-level is associated with higher audit quality and lower audit fees for supplier companies, compared to companies employing auditors with no supply chain expertise. Additional analyses show such effects are stronger for supplier companies when the sales made to their major customers comprise a greater proportion of their total revenue, and when the revenue cycle in the audit engagement for the supplier companies is more important. Supplemental analyses on the effect of changes in auditors’ supply chain expertise on both audit quality and audit fees for supplier companies reinforce the main results. We obtain these results while controlling for the usual determinants of audit quality and fees, along with auditors’ industry specialization at the national and city-levels.

Number of Pages in PDF File: 46

Keywords: Supply chain relationships, audit firm selection, audit quality, audit pricing

JEL Classification: M41, L14, L22

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Date posted: January 14, 2012 ; Last revised: October 29, 2012

Suggested Citation

Johnstone, Karla M. and Li, Chan and Luo, Shuqing, Client-Auditor Supply Chain Relationships, Audit Quality, and Audit Pricing (December 13, 2011). Available at SSRN: http://ssrn.com/abstract=1984897 or http://dx.doi.org/10.2139/ssrn.1984897

Contact Information

Karla M. Johnstone (Contact Author)
University of Wisconsin - Madison - Department of Accounting and Information Systems ( email )
School of Business
975 University Avenue
Madison, WI 53706
United States
608-234-1052 (Phone)
608-265-5031 (Fax)
Chan Li
University of Pittsburgh ( email )
Pittsburgh, PA 15260
United States
Shuqing Luo
National University of Singapore (NUS) ( email )
BIZ1, #07-20
15 Kent Ridge Drive
Singapore, 119245
Singapore
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