Audit pricing in China and Pakistan: a comparative review of audit practices
Vol. 13, Nr. 1/2014 , p98..110
Author(s):
Zahid Irshad Younas
Patrick Velte
Khadija Ashfaq
Keywords:
audit pricing, corporate governance, client risk, big 4 audit firms, audit quality
Abstract:
The purpose of this study is to investigate the firm-level factorseffect on the audit pricing in Chinaand Pakistan.For this purpose, we used the panel data of 160 firms of each country of studyfor the period from 2005 to 2011. First, we run the combined model for twocountries and observed that complexity of business transaction is the onlyvariable contributing positively and significantly in audit pricing of bothcountries. Then, for comparative review, we segregated the data of each countryand run separate model. The results of separate models show that, in the caseof Pakistanauditors mainly consider complexity of business transactions and client riskwhile pricing their engagement as an auditor. However, in the case of China theauditors only consider the Big 4 audit firm effect as a reputational tool whilepricing their audit activity. The auditors in China totally ignore the clientrisk and complexity of business transactions which may be problematic for theirauditing firm in future. The study concludes that audit pricing in Pakistan is more rational in comparison to China.
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http://online-cig.ase.ro/jcig/art/13_1_5.pdf
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