Volume 19, Number 1, June 2024
| Does Audit Fees Reflect Audit Risk? Evidence from Countries with Lower Audit Fees |
Abstract
This study aimed to investigate whether the significant policies and new auditing standards have substantial effects on audit effort and audit risk, and if such effects are reflected in audit fees. The observations from 2008 to 2021 were divided into three periods including “filing deadline reduction”, “implementation of new auditing standards”, and “border controls due to Coronavirus disease 2019 (COVID-19 pandemic)”. The empirical results indicate that both mandatory policies and the adoption of new auditing standards, as well as the significant changes brought about by the COVID-19 pandemic, have a substantial impact on auditors' audit work and audit risk. As a response to these varying audit risks, auditors adjust their audit fees accordingly. This study validated that even in countries where audit fees are generally at lower level, auditors still reflect audit risk in audit fees. Therefore, audit fees can indeed serve as one of the indicators for assessing audit risk and a firm's risk.
Keywords: Filing Deadline Reduction, New Auditing Standards, Coronavirus Disease 2019 (COVID-19 pandemic), Audit Risk, Audit Fees.
JEL Classification: M48, M42, M41