Artikel
The puzzling association between inventory and auditor pricing in China
The theory of audit pricing suggests that audit fees are positively associated with areas of higher inherent risk. Inventory is commonly cited as one such area, and many Western studies have reported a positive association between inventory and audit fees. However, most Chinese studies have reported a significant negative association. This study finds that this puzzling association is attributable to Chinese auditors charging a significant discount on the opening balance of inventory, whereas their U.S. counterparts charge a significant premium. Meanwhile, we show that opening-balance inventory is associated with higher inherent risk both in China and the U.S. On the other hand, both Chinese and U.S. auditors charge a significant discount on the net increase in inventory as of the current year end, and we show that this is associated with lower inherent risk. Therefore, Chinese auditors appear to underreact to the inherent risk associated with opening-balance inventory, which helps explain the puzzling negative association between inventory and audit fees in China.
- Language
-
Englisch
- Bibliographic citation
-
Journal: China Journal of Accounting Research ; ISSN: 1755-3091 ; Volume: 11 ; Year: 2018 ; Issue: 4 ; Pages: 351-366 ; Amsterdam: Elsevier
- Classification
-
Management
- Subject
-
Inventory
Audit fees
Inherent risk
China
- Event
-
Geistige Schöpfung
- (who)
-
Wu, Xi
Wang, Xueqin
Yang, Yulong
- Event
-
Veröffentlichung
- (who)
-
Elsevier
- (where)
-
Amsterdam
- (when)
-
2018
- DOI
-
doi:10.1016/j.cjar.2018.07.005
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Artikel
Associated
- Wu, Xi
- Wang, Xueqin
- Yang, Yulong
- Elsevier
Time of origin
- 2018
Other Objects (12)
Controller changes and auditor changes
Are state ownership and auditors' locality determinants of asset write-downs? Evidence from China
Integrated transportation - inventory models: A review
An efficient method for solving a correlated multi-item inventory system
Auditor choice and accruals patterns of cross-listed firms
The reform of accounting standards and audit pricing
Optimal electricity cost minimization of a grid-interactive pumped hydro storage using ground water in a dynamic electricity pricing environment
A note on the optimal pricing strategy in the discrete-time Geo/Geo/1 queuing system with sojourn time-dependent reward
Reexamining the relationship between inventory management and firm performance: An organizational life cycle perspective
The pricing methods on the monopoly district heating market
The impact of the Social Security Fund on auditor litigation risk
Audit pricing and nature of controlling shareholders: Evidence from France
Controller changes and auditor changes
Are state ownership and auditors' locality determinants of asset write-downs? Evidence from China
Integrated transportation - inventory models: A review
An efficient method for solving a correlated multi-item inventory system
Auditor choice and accruals patterns of cross-listed firms
The reform of accounting standards and audit pricing
Optimal electricity cost minimization of a grid-interactive pumped hydro storage using ground water in a dynamic electricity pricing environment
A note on the optimal pricing strategy in the discrete-time Geo/Geo/1 queuing system with sojourn time-dependent reward
Reexamining the relationship between inventory management and firm performance: An organizational life cycle perspective
The pricing methods on the monopoly district heating market
The impact of the Social Security Fund on auditor litigation risk
Audit pricing and nature of controlling shareholders: Evidence from France
Controller changes and auditor changes
Are state ownership and auditors' locality determinants of asset write-downs? Evidence from China
Integrated transportation - inventory models: A review
An efficient method for solving a correlated multi-item inventory system
Auditor choice and accruals patterns of cross-listed firms
The reform of accounting standards and audit pricing
Optimal electricity cost minimization of a grid-interactive pumped hydro storage using ground water in a dynamic electricity pricing environment
A note on the optimal pricing strategy in the discrete-time Geo/Geo/1 queuing system with sojourn time-dependent reward
Reexamining the relationship between inventory management and firm performance: An organizational life cycle perspective
The pricing methods on the monopoly district heating market
The impact of the Social Security Fund on auditor litigation risk