Business, Management and Accounting
8 years ago

Audit fees increase for struggling companies, impacting financial risk management.

Auditing A Journal of Practice & Theory
The Role of Auditee Profitability in Pricing New Audit Engagements
Paul L. Walker, Jeffrey R. Casterella

Paper Summary

The study looked at how auditors set prices for new audit jobs. They found that auditors still give discounts for new jobs, but are less likely to do so if the company had losses the year before. This is especially true for companies switching to bigger auditing firms. This shows that auditors adjust their fees based on the risk of the audit.

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