David D. Williams

The Association Between Client Factors and Audit Fees: a Comparison by Country and by Firm

Abstract This study investigates whether the factors identified by prior research as being associated with intra-country Big Eight audit fees are consistent (i) among countries (across the Big Eight) and (ii) among Big Eight auditing firms (across countries). Fees from 410 audits in five countries were analysed. Results indicate a similarity in the influence of client size and complexity variables among four of the five country audit-fee models and among seven of the Big Eight audit-fee models.

The effect of audit structure on the audit market

Abstract One way in which audit firms have begun to differentiate themselves is in the degree of structure employed in the audit approach. In this paper we argue that audit structure affects the relative competitiveness of the auditor in different client-market segments. No single audit structure represents an optimal choice for all clients. Rather, the attractiveness of each category of audit structure is contingent upon the degree of stability in the clients environment. Trends in intra-Big Eight market shares over the period 1976 to 1986 show that the auditor preferences of consumers of audit services are consistent with the environment in which the clients operate. The clients preference for a structured auditor increases with increased stability in the clients operating environment. Clients in unstable environments seem to have a preference for unstructured auditors. We attribute these changes to cost advantages that structured auditors have in stable environments, and that unstructured auditors have in unstable environments.

A GENEALOGY OF TODAY'S CONTRIBUTORS TO ACCOUNTING RESEARCH

This paper explores the “intellectual roots” of some of todays major contributors to accounting research. Specifically, twenty-four present-day contributors were identified through their publication records and editorial service. For each of these contributors, the dissertation chairman was identified and assumed to be the primary mentor; in turn, dissertation chairmen for these individuals were also identified. Several iterations of this process produced four generations of accounting genealogy. The intellectual roots depicted in this paper highlight noteworthy linkages with members of the Accounting Hall of Fame, recipients of the Outstanding Educators Award, and with education in the discipline of economics.

Audit Report Restrictions in Debt Covenants

While the debt-contracting literature has extensively examined financial covenants, there has been little attention paid to audit-related covenants. We focus on a covenant that restricts the borrower from receiving a going-concern audit report (GCAR covenant). We hypothesize that a debt agreement is more likely to include a GCAR covenant as the borrowers credit quality decreases and the length of the loan period increases, and that it is more likely to impose a covenant restricting the choice of auditor when the debt includes a GCAR covenant. Also, we expect that an audit client with a GCAR covenant will be charged a higher audit fee and is more likely to receive a going-concern audit report. We test these hypotheses on a sample of firms that issue private debt. Our results generally support our hypotheses. Our study suggests that lenders rely on the auditors assessment in contracting, and audit-related covenants influence auditor behavior.