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Determinants and Consequences of Audit Pricing for Charities, Including the Provision of Pro Bono Audits

journal contribution
posted on 2023-03-01, 02:44 authored by Yitang Jenny Yang, Roger SimnettRoger Simnett
Using unique Australian data, we first identify the determinants of the provision of pro bono audits to charities and examine their consequential audit quality. This advances our knowledge about how often and why auditors volunteer their services, and whether quality concerns are realized. Then, for non-pro bono audits, we calculate abnormal audit fees and examine their impact on audit quality. We find that pro bono audits are mainly supplied by Big 4 auditors to charities with greater public donations, a lower debt ratio, and operating in multiple locations. We are unable to identify evidence of impaired audit quality when comparing pro bono audits with non-pro bono audits. For non-pro bono audits, audit fees are significantly associated with size, complexity, and revenue sources, with premiums paid to larger audit firms. We find evidence consistent with reduced audit quality associated with negative abnormal audit fees for non-Big 4 audits.

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Journal

AUDITING: A Journal of Practice & Theory

ISSN

0278-0380

eISSN

1558-7991

Language

en

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