Assessing financial reporting quality of family firms: The auditors' perspective

Aloke Al Ghosh*, Charles Y. Tang

*Corresponding author for this work

Research output: Contribution to journalArticleScientificpeer-review

38 Citations (Scopus)

Abstract

We analyze audit fees and audit risk to extract auditors' assessment of family-firm's financial reporting quality. Relative to non-family firms, we find that auditors charge family firms significantly less, and the fee difference shrinks in magnitude when family firms have high audit risk. Using constructs for audit risk and audit effort, we show that family firms have lower audit risk, and that their auditors work less to provide assurance. Our findings suggest that superior reporting quality lowers audit risk and the need for greater audit investments, which is why auditors charge family firms less.

Original languageEnglish
Peer-reviewed scientific journalJournal of Accounting and Economics
Volume60
Issue number1
Pages (from-to)95-116
Number of pages22
ISSN0165-4101
DOIs
Publication statusPublished - 01.08.2015
MoE publication typeA1 Journal article - refereed

Keywords

  • 512 Business and Management
  • Family firms
  • Financial reporting quality
  • Audit fees
  • Audit risk

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