Santanu Mitra accepted for publication in the International Journal of Auditing
Santanu Mitra, Professor of Accounting at the Mike Ilitch School of Business had their paper, “Do auditors account for firm-level political risk?” accepted for publication in the International Journal of Auditing. This paper was co-authored with Mahmud Hossain of Clark Atlanta University The research explores the impact of firm-level political risk on auditor behavior, as it was found that firms with higher political risk face longer audit report lags, more going-concern opinions, and higher audit fees.
Abstract:
We examine whether firm-level political risk influences auditor behavior. Using a text-based political risk measure, we find that firms subject to higher levels of political risk face longer audit report lags, are more likely to have going-concern opinions issued by their auditors and pay higher audit fees. However, the effect of political risk on audit outcomes becomes moderated in the presence of higher lobbying efforts. Our findings suggest that political risk and lobbying efforts to mitigate such risk both influence auditors' judgments in planning audit services. Our original findings survive in a battery of robustness checks, and the primary results do not change when we use an exogenous political shock as an alternative proxy for firm-level political risk.
