RT journal article
T1 Audit Risk Management and Audit Effort in Small and Medium Audit Firms
A1 Ruiz Barbadillo, Emiliano
A1 Martinez Conesa, Isabel
A1 Serrano-Madrid, Jose
A1 Brown-Liburd, Helen
A2 Economía Financiera y Contabilidad
K1 Audit effort
K1 Audit quality
K1 Materiality
K1 Audit risk
K1 Internal control
K1 Inherent risk
AB The purpose of this paper is to analyze audit planning decisions of small and medium-sized Spanish auditfirms about risk evaluation and audit effort. Prior research examining audit risk overwhelmingly focuses onthe 4 large audit firms, and little is known about how audit planning decisions influence audit risk in smallerfirms; a significant part of the audit profession. Thus, it is important to examine the planning judgmentsin small and medium-sized audit firms and the link between planning risk assessments and the extent ofthe effort made to achieve an acceptable level of audit risk. Using specific audit engagement data derivedfrom publicly available databases and survey data, this study investigates the factors which explain the riskevaluation of client material misstatement and whether the effort made to execute the audit effectivelyresponds to that risk. We find a significant statistical relationship between audit risk and audit effort, whichprovides empirical evidence that auditors modify the extent of audit effort based on perceived audit riskand makes the work of the small firms debatable. Additional analysis shows that audit effort (i.e., hours) issignificantly influenced by the tenure and the timing of the audit (i.e., peak audit season). However, auditengagements with longer tenure do not adjust their audit effort in response to low management integrity orweak internal controls, which suggests familiarity, that is, auditors may not be so skeptical of managementincentives. This paper contributes to the debate on audit quality and whether the size of audit firms servesas an observable characteristic associated with higher audit quality.
PB ASEPUC
SN 1138-4891
YR 2024
FD 2024
LK http://hdl.handle.net/10498/35757
UL http://hdl.handle.net/10498/35757
LA eng
DS Repositorio Institucional de la Universidad de Cádiz
RD 10-nov-2026