Implementing mandatory audit firm rotation: Effects on audit and non-audit fees
The 2014 reform of the European Union (EU) regulation on auditing includes mandatory audit firm rotation and a significant limitation of the provision of non-audit services by the audit firm to their existing clients. This paper analyses the changes in audit fees, and non-audit fees, as well as in...
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| Format: | Article |
| Language: | English |
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Universidad de Murcia
2024-01-01
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| Series: | Revista de Contabilidad: Spanish Accounting Review |
| Subjects: | |
| Online Access: | https://revistas.um.es/rcsar/article/view/491481 |
| _version_ | 1797361918061576192 |
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| author | Ilias G. Basioudis Beatriz Cuellar-Fernández Javier Garcia-Lacalle |
| author_facet | Ilias G. Basioudis Beatriz Cuellar-Fernández Javier Garcia-Lacalle |
| author_sort | Ilias G. Basioudis |
| collection | DOAJ |
| description |
The 2014 reform of the European Union (EU) regulation on auditing includes mandatory audit firm rotation and a significant limitation of the provision of non-audit services by the audit firm to their existing clients. This paper analyses the changes in audit fees, and non-audit fees, as well as in their proportion, when there is a switch of audit firms, before and after the new regulation. The analysis is carried out for the Spanish-listed companies from 2011 to 2018 using two types of analyses, descriptive/comparative and multivariate, panel data, and regressions. As expected, the new EU regulation has resulted in a significant increase in audit firm switches. The results show that, when there is a change of audit firm, the incoming firm offers a significant discount to the new client with the outgoing firm. This is the case before and after the reform, and for both voluntary and mandatory switches after the reform. In addition, the reform has led to a reduction of non-audit fees, which is especially evident after a voluntary audit firm switch. We conclude that audit firms seem to be willing to take on the additional cost of auditing a new company to gain clients.
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| first_indexed | 2024-03-08T16:00:01Z |
| format | Article |
| id | doaj.art-f2f625cf3d7a43a19cd7043edc995131 |
| institution | Directory Open Access Journal |
| issn | 1138-4891 1988-4672 |
| language | English |
| last_indexed | 2024-03-08T16:00:01Z |
| publishDate | 2024-01-01 |
| publisher | Universidad de Murcia |
| record_format | Article |
| series | Revista de Contabilidad: Spanish Accounting Review |
| spelling | doaj.art-f2f625cf3d7a43a19cd7043edc9951312024-01-08T10:43:34ZengUniversidad de MurciaRevista de Contabilidad: Spanish Accounting Review1138-48911988-46722024-01-0127110.6018/rcsar.491481Implementing mandatory audit firm rotation: Effects on audit and non-audit feesIlias G. Basioudis0https://orcid.org/0000-0003-3116-2718Beatriz Cuellar-Fernández1https://orcid.org/0000-0002-5557-0380Javier Garcia-Lacalle2https://orcid.org/0000-0002-4660-6089Aston Business School, University of Aston, Birmingham-UKUniversity of Zaragoza, Zaragoza-SPAINUniversity of Zaragoza, Zaragoza-SPAIN The 2014 reform of the European Union (EU) regulation on auditing includes mandatory audit firm rotation and a significant limitation of the provision of non-audit services by the audit firm to their existing clients. This paper analyses the changes in audit fees, and non-audit fees, as well as in their proportion, when there is a switch of audit firms, before and after the new regulation. The analysis is carried out for the Spanish-listed companies from 2011 to 2018 using two types of analyses, descriptive/comparative and multivariate, panel data, and regressions. As expected, the new EU regulation has resulted in a significant increase in audit firm switches. The results show that, when there is a change of audit firm, the incoming firm offers a significant discount to the new client with the outgoing firm. This is the case before and after the reform, and for both voluntary and mandatory switches after the reform. In addition, the reform has led to a reduction of non-audit fees, which is especially evident after a voluntary audit firm switch. We conclude that audit firms seem to be willing to take on the additional cost of auditing a new company to gain clients. https://revistas.um.es/rcsar/article/view/491481Audit regulationAudit firm rotationLowballing practicesAudit feesNon-audit fees |
| spellingShingle | Ilias G. Basioudis Beatriz Cuellar-Fernández Javier Garcia-Lacalle Implementing mandatory audit firm rotation: Effects on audit and non-audit fees Revista de Contabilidad: Spanish Accounting Review Audit regulation Audit firm rotation Lowballing practices Audit fees Non-audit fees |
| title | Implementing mandatory audit firm rotation: Effects on audit and non-audit fees |
| title_full | Implementing mandatory audit firm rotation: Effects on audit and non-audit fees |
| title_fullStr | Implementing mandatory audit firm rotation: Effects on audit and non-audit fees |
| title_full_unstemmed | Implementing mandatory audit firm rotation: Effects on audit and non-audit fees |
| title_short | Implementing mandatory audit firm rotation: Effects on audit and non-audit fees |
| title_sort | implementing mandatory audit firm rotation effects on audit and non audit fees |
| topic | Audit regulation Audit firm rotation Lowballing practices Audit fees Non-audit fees |
| url | https://revistas.um.es/rcsar/article/view/491481 |
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