Using the Same Provider for Financial Statement Audit and Assurance of Extended External Reports: Choices and Consequences

Auditing: A Journal of Practice & Theory

54 Pages Posted: 17 Apr 2019 Last revised: 28 Mar 2022

See all articles by Meiting Lu

Meiting Lu

Macquarie University - Faculty of Business and Economics; Macquarie University, Macquarie Business School

Roger Simnett

Deakin University; UNSW Australia Business School, School of Accounting

Shan Zhou

The University of Sydney

Date Written: March 10, 2022

Abstract

Independent assurance of extended external reports (EER) is one of the most significant trends in today’s global assurance profession. When companies decide to purchase third-party assurance on EER, they need to decide whether to engage their financial statement auditor or a different assurance provider. We examine factors that impact this decision, and the consequences of this decision on financial statement audit quality and cost. We find that independence concerns are associated with companies choosing different EER assurance providers from their incumbent financial statement auditors, while providers’ expertise in EER assurance and the recent trend of integrating non-financial information into the annual report promote the use of the same provider. We further find some evidence that companies with the same provider attesting to both financial statements and EER benefit from having higher financial statement audit quality without paying significantly higher audit fees.

Keywords: audit, assurance, audit quality, assurance expertise, independence, extended external report

Suggested Citation

Lu, Meiting and Simnett, Roger and Zhou, Shan, Using the Same Provider for Financial Statement Audit and Assurance of Extended External Reports: Choices and Consequences (March 10, 2022). Auditing: A Journal of Practice & Theory, Available at SSRN: https://ssrn.com/abstract=3361616 or http://dx.doi.org/10.2139/ssrn.3361616

Meiting Lu

Macquarie University - Faculty of Business and Economics ( email )

Sydney, New South Wales 2109
Australia

Macquarie University, Macquarie Business School ( email )

New South Wales 2109
Australia

Roger Simnett

Deakin University ( email )

75 Pigdons Road
Victoria, Victoria 3216
Australia

UNSW Australia Business School, School of Accounting ( email )

Sydney, NSW 2052
Australia
+61 2 9385 5825 (Phone)
+61 2 9385 5925 (Fax)

Shan Zhou (Contact Author)

The University of Sydney ( email )

University of Sydney
Sydney, NSW 2006
Australia

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