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Financial statement comparability and audit pricing

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  • Jinghui Sun
  • Liuchuang Li
  • Baolei Qi

Abstract

This study examines the impact of financial statement comparability on audit pricing. Using the comparability measures of De Franco, Kothari and Verdi, we find that auditors charge lower audit fees for clients with greater financial statement comparability. This negative relation is more pronounced when auditors are industry specialists or clients in industries with higher operational heterogeneity. We also find that clients with greater financial statement comparability have lower audit risk, and their auditors exert less audit effort to provide assurance. Our study contributes to the current literature by documenting that homogeneity in financial statement reporting decreases audit risk and increases audit efficiency, reducing audit pricing.

Suggested Citation

  • Jinghui Sun & Liuchuang Li & Baolei Qi, 2022. "Financial statement comparability and audit pricing," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 62(5), pages 4631-4661, December.
    • Handle: RePEc:bla:acctfi:v:62:y:2022:i:5:p:4631-4661
    DOI: 10.1111/acfi.12970
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    References listed on IDEAS

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