Santanu Mitra accepted for publication in International Journal of Auditing
Mike Ilitch School of Business Professor of Accounting Santanu Mitra has had a paper accepted for publication in the International Journal of Auditing, which publishes results of original auditing research conducted in research institutions as well as in practice.
The paper, “Do auditors account for firm-level political risk?” was co-authored by Mahmud Hossain (University of West Georgia).
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.