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The Impact of Religiosity on Audit Pricing

Leventis, S.; Dedoulis, E.; Abdelsalam, O.

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Authors

S. Leventis

E. Dedoulis



Abstract

Prior literature has demonstrated that religiosity is associated with a reduced acceptance of unethical business practices and financial reporting irregularities. On this premise, we examine whether religiosity, conceptualized as the degree of adherence to religious norms in the geographical area where a firm’s headquarters is located, has an impact on audit firms’ pricing decisions in the US. We measure the intensity of religiosity by the number of adherents relative to the total population in a county and demonstrate that increased religious adherence operates as an institutionalized monitoring mechanism that decreases audit risk and audit costs, which is, in turn, reflected in reduced audit pricing. Additional tests suggest that the impact of religiosity on auditors’ pricing decisions is not differentiated by levels of auditor expertise but that audit fees are determined by an auditor’s relative location in a market sector and religious adherence. We conclude that religious adherence reduces the need for shareholders to bear the costs of monitoring agents, a finding which could be of importance for market participants and regulators.

Citation

Leventis, S., Dedoulis, E., & Abdelsalam, O. (2018). The Impact of Religiosity on Audit Pricing. Journal of Business Ethics, 148(1), 53-78. https://doi.org/10.1007/s10551-015-3001-x

Journal Article Type Article
Acceptance Date Dec 17, 2015
Online Publication Date Dec 29, 2015
Publication Date Mar 1, 2018
Deposit Date Dec 20, 2015
Publicly Available Date Dec 29, 2016
Journal Journal of Business Ethics
Print ISSN 0167-4544
Electronic ISSN 1573-0697
Publisher Springer
Peer Reviewed Peer Reviewed
Volume 148
Issue 1
Pages 53-78
DOI https://doi.org/10.1007/s10551-015-3001-x
Keywords Agency costs, Audit fees, Audit pricing, Religiosity.
Public URL https://durham-repository.worktribe.com/output/1416380

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