The Impact of SOX on Audit Pricing: Audit Risk and Compliance Cost
Date Issued
2007
Date
2007
Author(s)
Lin, Yu-Chen
DOI
en-US
Abstract
The Sarbanes-Oxley Act of 2002 substantially changes the environment of financial reporting and auditing. Using the mandatory audit fees disclosure data from 2000 to 2005, this study examines the impact of SOX on audit pricing. The empirical results show that there is a structure change in audit pricing, and the change pattern differs between Big-N and Non-Big-N. Specifically, for the audit risk factors, the coefficient of engagement risk factor increases, but the coefficient of substantive testing risk decreases in the post-SOX period. As to the compliance costs, it is found that auditors pass their SOX compliance costs (including Section 404, 408, and the audit work concentration for fiscal year ended in December) to their clients. This study also documents an increase in Big-N premium, and more fees are charged to clients raising funds from the capital market. Finally, comparing the Big-N vs. Non-Big-N, the results show that only Big-N audit firms charge more engagement risk premium after SOX. This finding suggests that the Big-N firms are more care about clients’ engagement risk and they tend to charge more engagement risk premium after SOX since they have more bargaining power.
Subjects
審計訂價
沙賓法案
審計風險
遵循成本
結構改變
audit pricing
Sarbanes-Oxley Act
audit risk
compliance cost
structure change
Type
other
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ntu-96-D87722003-1.pdf
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