The beginning of the 21st century was plagued with unprecedented instances of corporate fraud. In an attempt to address apparent non-existent or “broken” corporate governance policies, sweeping measures of financial reporting reform ensued, having specific requirements relating to the composition of audit committees, the interaction between audit committees and external auditors, and procedures concerning auditors’ assessment of client risk. The purpose of my dissertation is to advance knowledge about “good” corporate governance by examining the association between meeting-or-beating analyst forecasts and audit fees, audit committee compensation, and audit committee tenure and “busyness”. Using regression analysis, I found the following: 1) the frequency of meeting-or-just beating (just missing) analyst forecasts is negatively (positively) associated with audit fees, 2) the extent by which a firm exceeds analysts’ forecasts is positively (negatively) associated with audit committee compensation that is predominately equity-based (cash-based), and 3) the likelihood of repeatedly meeting-or-just beating analyst forecasts is positively associated with audit committee tenure and “busyness”. These results suggest that auditors consider clients who frequently meet-or-just beat forecasts as being less “risky”, and clients that frequently just miss as being more “risky”. The results also imply that cash-based director compensation is more successful in preserving the effectiveness of the audit committee’s financial reporting oversight role, that equity-based compensation motivates independent audit committee directors to focus on short-term performance thereby aligning their interests with management, and that audit committee director tenure and the degree of director “busyness” can affect an audit committee member’s effectiveness in providing financial reporting oversight. Collectively, my dissertation provides additional insights regarding corporate governance practices and informs policy-makers for future relevant decisions.

The need for reliable financial information has led to the establishment of audits as a vital component of corporate governance. Audits serve to enhance the credibility of financial statements, mitigate agency conflicts, and instill trust among stakeholders. In an evolving business landscape, external factors such as covid, war, and climate change have emerged, potentially impacting the determinants of audit fees. Purpose: The main objective of this thesis is to investigate the influence of external risk factors such as the covid pandemic, the Russia-Ukraine war, and climate change on audit fees. Theoretical perspectives: Theoretical concepts base on previous research and publications on determinants of audit fees, audit risk, the covid pandemic, Russia-Ukraine war, and climate change. Literature was used to derive the research gap and research questions. Methodology: A qualitative method base exploratory approach. A literature review was conducted to uncover areas of interest that require more research. The influence of external risk on the audit fees was identified as a potential area for research; a focus on the covid pandemic, the Russia-Ukraine war, and climate change. The research is based on semi-structured interviews with auditors from big four audit firms in Sweden. Empirical foundation: Six auditors from various professional levels participated in the interview process to obtain empirical data. Conclusions: The findings of the study show that covid, Russia-Ukraine war, and climate change have significant implications on audit fees. These external factors contribute to increased complexity and risk in the audit process, necessitating additional resources and effort leading to increase in audit fees. Recognizing the influence of COVID-19, war, and climate change on audit fees is crucial for auditors, audit clients, policymakers, and regulators. This awareness can inform decision-making processes, financial planning, risk assessments, and the development of appropriate regulatory frameworks, ultimately promoting transparency and strengthening the overall integrity of the audit process. The findings contribute to the existing body of knowledge and serve as a foundation for further exploration and understanding of the complex relationship between these external factors and audit fees.

All companies are subject to some degree of regulatory oversight of their operations. Economics, finance, and government research demonstrate that operational regulatory oversight (for example, provided by the EPA or FDA) imposes financial and operating burdens on regulated firms. My study examines how auditors respond to their clients’ operational regulatory oversight with additional audit costs, as reflected in audit fees. I focus on operational regulatory oversight from six federal regulatory agencies with authority to regulate companies in any industry. I find that operational regulatory oversight intensity, measured by number of regulators, occurrences of regulator-specific disclosures, and regulatory fragmentation, is positively associated with audit fees. Cross-sectional tests show that operational oversight from “continuous” regulators (i.e., regulators that maintain routine oversight) significantly weakens the positive association between operational regulatory oversight and audit fees. Further analyses provide no evidence that the higher audit fees are accompanied by changes in auditor effort. Lastly, my results are robust to an audit fee change model and an alternative measure of regulatory fragmentation. / Business Administration/Accounting

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Doctor of Philosophy / This study explores whether companies that engage in outsourcing suffer negative audit-related consequences. Outsourcing exposes companies to third-party risk, which is the risk associated with outsourcing IT systems and/or business operations to external companies. Publicly traded companies in the United States are required to file a financial report with the Securities and Exchange Commission each year that includes a discussion of significant risks the company faces. I use this disclosure to identify companies that reveal third-party risk as a major threat to their organization and use machine learning to develop a measure that distinguishes companies exposed to third-party risk from those that are not. Using this measure, I examine whether companies exposed to third-party risk arrangements are more likely to suffer from low quality internal controls, to experience a cybersecurity incident, or to pay higher fees to their external auditor. The results do not show an association between my measure of third-party risk and the likelihood that a company reports a problem with internal controls. However, I do find that companies exposed to third-party risk are more likely to experience a cybersecurity incident. Lastly, I find that companies exposed to third-party risk pay higher fees to their external auditors in the initial year that this risk appears in their annual report. Overall, these results provide initial empirical evidence on the existence and consequences of third-party risk. The findings may be of interest to accounting professionals and managers who are in the early stages of learning to identify and manage their third-party risk exposure. Regulators may also benefit from this study as they contemplate updating the auditing standards related to outsourcing.

Redan i samband med Kreugerkraschen i början av 1930-talet började man ifrågasätta och ställa krav på revisorers oberoende. Problematiken kring revisorers oberoende är än idag en högst aktuell fråga. Effekten av en revisor som inte förhåller sig oberoende kan vara att företagets intressenter förses med information som inte är rättvisande. Bakomliggande faktorer som kan påverka revisorers oberoende är revisionsbyråns arvoden och klientföretagets storlek. I denna studie kartlägger vi andelen orena revisionsberättelser och going concern-varningar hos företag som gått i konkurs. Vidare kartlägger och analyserar vi potentiella samband mellan svenska revisorers uttalanden i revisionsberättelsen och revisorernas arvoden samt klientföretagens storlek. Vi studerade om revisionsberättelserna var rena eller orena samt om någon varning kring företagets fortlevnad utfärdats. Studien omfattar aktiebolag som gått i konkurs under perioden 2010-01-01 till 2010-08-31. Det finns tidigare forskning som påvisar ett samband mellan höga arvoden till revisorn och ett minskat oberoende hos denne samtidigt som andra studier påvisar motsatsen. Det finns även studier som bekräftar att företags storlek påverkar revisorns oberoende. I vår studie har vi kommit fram till att det finns ett samband mellan det totala arvodet till revisionsbyrån och andelen orena revisionsberättelser. Vi har även funnit ett samband som tyder på att revisorn blir mer kritisk och att andelen going concern-varningar ökar ju högre arvoden ett företag betalar till sin revisor. I vår studie har vi också funnit att klientföretagets storlek har påverkan på andelen orena revisionsberättelser (ju större företag desto lägre andel orena revisionsberättelser) medan företagets storlek inte har någon inverkan på andelen going concern-varningar. / Already in the Kreuger crash in the early 1930s the society began to question and make demands on auditor’s independence. The question of an auditor’s independence is still today a topical issue. The effect of an auditor who is not independent is that the company´s annual report provides the stakeholders with false information. Underlying factors that may affect the auditor`s independence can be the company’s auditing fees as well as the size of the company. We have in this study categorized and analyzed differences between Swedish auditor`s statements in audit reports and auditors fees as well as the size of the client company. We chose to study the auditors statement in the company’s annual audit report and if any warning about the survival of the company were issued. We chose to limit our study to only Swedish companies that has gone bankrupt during the period 2010-01-01 to 2010-08-31. Previous research state that there is a correlation between high fees to the auditor`s firm and the auditor`s loss of independence, while there is studies that state the opposite. There are also studies that confirm that the company’s size affect the auditor`s independence. We have in our study confirmed that there is a correlation between size of the total fee to the auditing firm and the share of clean audit reports. We have also found a correlation that indicates that the auditor is more critical in the audit and that the share of going concern-warnings increases when the fees to the auditor increases. The size of the client company has, according to our study, influence on the share of clean audit reports (the share of clean audit reports increases when the companies are larger) while the size of the client company has no effect on the share of going concern-warnings.

Syfte: Syftet med vårt examensarbete är att försöka identifiera och analysera hur revisorer definierar revisionskvalité och hur de förvissar sig om att de genomför revision med hög kvalité Metod: För att nå fram till ett resultat har en abduktiv ansats med en kvantitativ metod använts för denna explorativa studie Teoretiskt perspektiv: Studien utgår ifrån befintlig teori och vetenskapliga studier men även resultatet av våra pilotintervjuer som använts för att urskilja faktorer som kan förklara vårt syfte. Teorier som använts är professionsteori, institutionell teori och byråkulturell teori Empiri: Det empiriska materialet grundar sig på en enkätundersökning som vänder sig till Sveriges revisorer i FARs medlemsregister. Det empiriska materialet har analyserats av statistiska tester Resultat: Analysen påvisade att de faktorer som har den största positiva påverkan på revisionskvalité är expertis tillsammans med revisorns kompetens / Purpose: The purpose of this thesis is to identify and analyze how auditors define audit quality and how they are ascertain that they perform audit with high quality Methodology: In order to reach a result, an abductive approach with a quantitative method have been used in this exploratory study Theoretical perspective: The study is based on existing theories and scientific studies, but also the results of our pilot interviews are used to identify factors that may explain our purpose. Theories that have been used are professional theory, institutional theory and agency cultural theory Empirical foundation: The empirical material is based on a questionnaire addressed to the Swedish auditors in FARs membership list. The empirical data have been analyzed by statistical tests Conclusion: The analysis showed that the factors that are having the greatest positive impact on audit quality are expertise together with the auditor's proficiency

The determinants of audit fees and report lag: A comparative study of Egypt and the UK Despite the occurrence of recent economic and political events such as the global financial crisis and Arab spring in the Middle East, researchers have not addressed the effects of such events on the auditing profession. That is has given a motive to this study to explore this point of research. This study has three main objectives. The first objective is to investigate the determinants of audit fees and audit report timeliness in the Egyptian and UK contexts. The second objective is to point out how the economic and political events could affect these determinants. The third objective is to make a comparison between the response of auditors towards economic and political instability in both countries. These objectives are set to solve the research problem of this study which is to investigate how the price behaviour of audit fees and report timeliness can vary in two different contexts: Egypt and the UK, and to highlight how auditors respond to such economic (Global Financial Crisis) and political events (Egyptian Revolution). A special attention has been addressed to tourism industry while investigating audit pricing and timeliness decisions throughout this study for two reasons. First, tourism industry play a critical role for the economy of many developing and developed countries. Second, tourism industry is highly affected by any economic and political events. For these reasons, tourism industry is surrounded by high risk during the economic or political instability, and thus this might result in special procedures and decisions taken by the auditors regarding tourism industry clients during instable periods. To take into account the most recent economic and political events, the study sample covers the period of six financial years from 2008 to 2013. This sample period has been chosen to capture the global financial crisis that has taken place during 2008-2009 and also to investigate the effects of the Egyptian revolution that has taken place on January 25, 2011, and subsequent political events. The study sample includes 212 Egyptian companies listed in the Egyptian stock market and the top 350 companies (FTSE 350) listed in the London Stock Exchange. For guaranteeing the preciseness of the findings, advanced panel data Prais-Winsten statistical analysis technique has been used throughout this study. Results of this study reveal consistency between Egypt and UK in most signs of coefficients of audit fees determinants. However, a lot of differences exist between the audit report lag determinants in the Egyptian and UK context that suggest that a one-size-fits-all approach cannot be generalized in audit report lag determinants for various countries. Despite that tourism is a very risky industry that is easily affected by economic and political instability, results reported in Egypt and UK reveal that audit fees charged and audit delay reported for tourism did not differ from other industries in both contexts. Results also reveal that Big N auditing firms in the UK have competitive advantages of not charging an audit fee premium and offering a more timely audit report than non-big N. These advantages increase the demand of Big N in the UK and increase their dominance. On the other side, in Egypt, Big N auditing firms do not offer such advantage of timely audit reports than non-big N, besides, they charge their clients with audit fee premium. That enabled medium sized and small auditing firms to penetrate the Egyptian auditing market and increase their market share, and thus, Big N dominance is not high in the Egyptian audit market as that in the UK. Different auditor responses to global financial crisis (GFC) have been documented in both countries. As auditors in Egypt decreased their audit fees and offered more timely audit report to face the economic recession and the anxiety of investors accompanied with the GFC. However, neither the pricing of auditing services nor the audit report lag have been affected during the GFC in the UK audit market. According to the results of this study, during the Egyptian Revolution, auditors tended to charge audit fees premium without increasing/decreasing audit delay. This implies that the increase in audit fees during revolution was a risk premium due to the instability in economic and political conditions and was not accompanied by any increase in audit effort and delay.

Abstract The only observable outcome of the audit process is normally the issued audit report, which, at least in its standard form, does not contain much information about audit quality (Balsam et al. 2003). Auditor quality is multidimensional and inherently unobservable, and there is no single auditor characteristic that can be used as a proxy for it. In the absence of direct measures for quality, audit consumers must assess the quality by using quality surrogates, or the overall reputation of an auditor (e.g. Shapiro 1983, Riley 2001). The purpose of this dissertation is to enhance our understanding of the determinants and implications of quality-differentiated audits through four inter-related essays. The findings of the essays shed light on the various ways in which client firms strive to signal high audit and consequent earnings quality. From the supply-side perspective, the essays of this dissertation provide evidence how some (individual) auditors have been able to establish a reputation higher than the generic reputation. Importantly, this dissertation adds to the ongoing debate about the regulator changes and initiatives in the European Union and the U.S.A. requiring disclosure of engagement partner identity. The rationale behind such a requirement is that it could bring within investors’ reach greater transparency and accountability in the auditing process thereby helping to restore investor confidence in the capital markets. Consistent with this rationale, the results of this dissertation support the view that audit markets (and/or firm insiders) infer audit quality, at least to some extent, from the characteristics of the individual audit partner in charge.

In this paper we studied the effect of International Financial Reporting Standards (IFRS) on audit fees in Sweden. Using a classic audit fee model, with data between 2001-2019 for 100 publicly traded Swedish firms we studied the effects of IFRS on audit fees during the implementation period as well as the long-term effects of IFRS adoption. In addition to this we investigated if the adoption of IFRS affected large and small firms differently. In contrast to most previous literature, we found that the implementation of IFRS has not had any short- or long-term effects on audit fees in Sweden. However, we found small indications that changes in audit fees are lower for large firms after the implementation of IFRS but the model’s explanatory factor was low and the effect small so no definitive conclusions could be made. The results remain the same after performing several robustness tests.