The Guiding Reasons Why Public Interest Entities in Europe Elect a Particular Audit Firm and Auditors versus the Cost of the Audit

Darko Dachevski () and Barry Ackers ()
Additional contact information
Darko Dachevski: University of South Africa–College of Accounting Sciences, Pretoria, South Africa
Barry Ackers: University of South Africa–College of Accounting Sciences, Pretoria, South Africa

Finance, Accounting and Business Analysis, 2024, vol. 6, issue 1, 12-33

Abstract: Declining audit fees represent a worldwide phenomenon which draws particular attention and concerns in the audit profession. The study explores the guiding reasons of public interest entities (PIEs) in Europe when electing a particular auditor, and investigates whether these reasons are reflected on audit fees. Further, it considers the impact of the prevailing macroeconomic conditions on these reasons, and accordingly on the cost of the audit. To this end the study intends to investigate whether these guiding reasons represent a declining factor on audit fees and under which macroeconomic conditions. To achieve the study objectives, a pragmatic mixed methods research approach is adopted, comprising surveys of respondents at audit firms and PIEs, and semi-structured interviews with participants at purposively selected PIEs, in Europe. The study finds that the guiding reasons are associated with the macroeconomic conditions, and reflect PIEs’ expectations from the external audit. Ultimately, these expectations impact the cost of the audit depending on the current trends in the economy. The study proposes that the audit regulatory authorities should take actions to regulate PIEs’ expectations from the external auditors and regulate the reporting requirements of auditors and audit firms, to achieve a proper balance between the scope of the audit procedures and the cost of the audit. In this view, the study recommends audit regulatory authorities adopt guidelines for determining the cost of the audit based on the assessed audit risk and scope of audit procedures.

Keywords: audit risk; cost of the audit; guiding reasons of PIEs; prevailing macroeconomic conditions; scope of audit procedures (search for similar items in EconPapers)
JEL-codes: E66 M42 M48 M49 (search for similar items in EconPapers)
Date: 2024
References: Add references at CitEc
Citations:

Downloads: (external link)
https://faba.bg/index.php/faba/article/view/173/85 (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aan:journl:v:6:y:2024:i:1:p:12-33

Access Statistics for this article

More articles in Finance, Accounting and Business Analysis from University of National and World Economy, Institute for Economics and Politics Contact information at EDIRC.
Bibliographic data for series maintained by Yanko Hristozov ().