The Effect of Political Visibility on Audit Effort and Audit Pricing

19 Pages Posted: 8 Nov 2010

See all articles by Nives Botica Redmayne

Nives Botica Redmayne

affiliation not provided to SSRN

Michael E. Bradbury

Massey University

Steven F. Cahan

University of Auckland Business School

Abstract

This study examines whether auditors adjust their effort and pricing decisions for political visibility. We argue, from the behavioural literature, that political visibility will create the need for more justification by auditors. Using data on actual audit fees, hours and billing rates for a sample of New Zealand public sector companies, we find that total audit fees are positively related to the number of press mentions (our proxy for political visibility). Consistent with our expectations we find that audit fees are monotonically related to audit fees. We also find that auditors increase the hours spent on the audit but not billing rates, which further suggests defensive bolstering by auditors.

Suggested Citation

Redmayne, Nives Botica and Bradbury, Michael E. and Cahan, Steven F., The Effect of Political Visibility on Audit Effort and Audit Pricing. Accounting & Finance, Vol. 50, No. 4, pp. 921-939, December 2010. Available at SSRN: https://ssrn.com/abstract=1702592 or http://dx.doi.org/10.1111/j.1467-629X.2010.00350.x

Nives Botica Redmayne

affiliation not provided to SSRN

No Address Available

Michael E. Bradbury (Contact Author)

Massey University ( email )

School of Accountancy
Private Bag 102 904
Auckland
New Zealand
64 9 414 0800 (Phone)
64 9 441 8133 (Fax)

Steven F. Cahan

University of Auckland Business School ( email )

Faculty of Business & Economics
Private Bag 92019
Auckland
New Zealand

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