Assessing Financial Reporting Quality of Family Firms: The Auditors’ Perspective

Journal of Accounting and Economics, 2015 Forthcoming

47 Pages Posted: 18 Mar 2015

See all articles by Al (Aloke) Ghosh

Al (Aloke) Ghosh

City University of New York (CUNY) - Baruch College

Charles Tang

Pace University - Lubin School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: March 16, 2015

Abstract

We analyze audit fees and audit risk to extract auditor’s assessment of family firms’ financial reporting quality. Relative to non-family firms, we find that auditors charge significantly less from family firms and the fee difference shrinks in magnitude when family firms have high audit risk. Using constructs for audit risk and audit effort, we show that family firms have lower audit risk and that their auditors work less to provide assurance. Our findings suggest that superior reporting quality lowers audit risk and the need for greater audit investments, which is why auditors charge less from family firms.

Keywords: family firms, financial reporting quality, audit fees, audit risk

JEL Classification: M41

Suggested Citation

Ghosh, Al (Aloke) and Tang, Charles Ya B., Assessing Financial Reporting Quality of Family Firms: The Auditors’ Perspective (March 16, 2015). Journal of Accounting and Economics, 2015 Forthcoming. Available at SSRN: https://ssrn.com/abstract=2579141

Al (Aloke) Ghosh (Contact Author)

City University of New York (CUNY) - Baruch College ( email )

One Bernard Baruch Way
P.O. Box B12-225
New York, NY 10010
United States
646-312-3184 (Phone)
646-312-3161 (Fax)

Charles Ya B. Tang

Pace University - Lubin School of Business ( email )

1 Pace Plaza
New York, NY 10038-1502
United States

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