Auditors' Responses to Organized Labor in Client Firms

Simon Yu Kit FUNG, Woo Jong LEE, Bin SRINIDHI, Lixin Nancy SU

Research output: Journal PublicationsJournal Article (refereed)

Abstract

Using a sample of US firms for the period 2000-2011, we examine whether organized labor in audit client firms affects auditor decisions such as audit fees and going-concern qualifications. We find that labor unionization is associated with higher audit fees and a higher likelihood of going-concern qualifications but shorter audit report lags, and the results on audit fees are stronger in the case of strikes. These results suggest that the presence of labor union(s) in a client firm constitutes a non-trivial risk element to auditors, which cannot be mitigated by additional audit effort.
Original languageEnglish
Pages (from-to)23-65
Number of pages43
JournalSeoul Journal of Business
Volume23
Issue number2
Publication statusPublished - Dec 2017

Fingerprint

Organized labor
Audit fees
Auditors
Going concern
Qualification
Audit reports
Labor unions
Labor
Audit
Unionization
Lag
Audit effort

Bibliographical note

We are grateful to Bok Baik (Editor), Mark DeFond, Ferdinand Gul, Sophia Hamm, Chul W. Park, Haina Shi, Dan Simunic, Jing Zhou, three anonymous reviewers, and workshop participants at EAA Annual Congress 2015, AAA Annual Meeting 2015, Korean Accounting Association International Conference 2015, University of Texas at Arlington, Shanghai University of Finance and Economics, Fudan University and University of Hong Kong for their helpful comments. Woo-Jong Lee appreciates financial support by the Institute of Management Research at Seoul National University.

Keywords

  • AUDITING fees
  • BUSINESS enterprises
  • AUDITORS
  • LABOR unions
  • STRIKES & lockouts
  • UNITED States
  • Audit fees
  • Audit report
  • Going-concern audit opinions
  • Labor union

Cite this

FUNG, S. Y. K., LEE, W. J., SRINIDHI, B., & SU, L. N. (2017). Auditors' Responses to Organized Labor in Client Firms. Seoul Journal of Business, 23(2), 23-65.
FUNG, Simon Yu Kit ; LEE, Woo Jong ; SRINIDHI, Bin ; SU, Lixin Nancy. / Auditors' Responses to Organized Labor in Client Firms. In: Seoul Journal of Business. 2017 ; Vol. 23, No. 2. pp. 23-65.
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abstract = "Using a sample of US firms for the period 2000-2011, we examine whether organized labor in audit client firms affects auditor decisions such as audit fees and going-concern qualifications. We find that labor unionization is associated with higher audit fees and a higher likelihood of going-concern qualifications but shorter audit report lags, and the results on audit fees are stronger in the case of strikes. These results suggest that the presence of labor union(s) in a client firm constitutes a non-trivial risk element to auditors, which cannot be mitigated by additional audit effort.",
keywords = "AUDITING fees, BUSINESS enterprises, AUDITORS, LABOR unions, STRIKES & lockouts, UNITED States, Audit fees, Audit report, Going-concern audit opinions, Labor union",
author = "FUNG, {Simon Yu Kit} and LEE, {Woo Jong} and Bin SRINIDHI and SU, {Lixin Nancy}",
note = "We are grateful to Bok Baik (Editor), Mark DeFond, Ferdinand Gul, Sophia Hamm, Chul W. Park, Haina Shi, Dan Simunic, Jing Zhou, three anonymous reviewers, and workshop participants at EAA Annual Congress 2015, AAA Annual Meeting 2015, Korean Accounting Association International Conference 2015, University of Texas at Arlington, Shanghai University of Finance and Economics, Fudan University and University of Hong Kong for their helpful comments. Woo-Jong Lee appreciates financial support by the Institute of Management Research at Seoul National University.",
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FUNG, SYK, LEE, WJ, SRINIDHI, B & SU, LN 2017, 'Auditors' Responses to Organized Labor in Client Firms', Seoul Journal of Business, vol. 23, no. 2, pp. 23-65.

Auditors' Responses to Organized Labor in Client Firms. / FUNG, Simon Yu Kit; LEE, Woo Jong; SRINIDHI, Bin; SU, Lixin Nancy.

In: Seoul Journal of Business, Vol. 23, No. 2, 12.2017, p. 23-65.

Research output: Journal PublicationsJournal Article (refereed)

TY - JOUR

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AU - FUNG, Simon Yu Kit

AU - LEE, Woo Jong

AU - SRINIDHI, Bin

AU - SU, Lixin Nancy

N1 - We are grateful to Bok Baik (Editor), Mark DeFond, Ferdinand Gul, Sophia Hamm, Chul W. Park, Haina Shi, Dan Simunic, Jing Zhou, three anonymous reviewers, and workshop participants at EAA Annual Congress 2015, AAA Annual Meeting 2015, Korean Accounting Association International Conference 2015, University of Texas at Arlington, Shanghai University of Finance and Economics, Fudan University and University of Hong Kong for their helpful comments. Woo-Jong Lee appreciates financial support by the Institute of Management Research at Seoul National University.

PY - 2017/12

Y1 - 2017/12

N2 - Using a sample of US firms for the period 2000-2011, we examine whether organized labor in audit client firms affects auditor decisions such as audit fees and going-concern qualifications. We find that labor unionization is associated with higher audit fees and a higher likelihood of going-concern qualifications but shorter audit report lags, and the results on audit fees are stronger in the case of strikes. These results suggest that the presence of labor union(s) in a client firm constitutes a non-trivial risk element to auditors, which cannot be mitigated by additional audit effort.

AB - Using a sample of US firms for the period 2000-2011, we examine whether organized labor in audit client firms affects auditor decisions such as audit fees and going-concern qualifications. We find that labor unionization is associated with higher audit fees and a higher likelihood of going-concern qualifications but shorter audit report lags, and the results on audit fees are stronger in the case of strikes. These results suggest that the presence of labor union(s) in a client firm constitutes a non-trivial risk element to auditors, which cannot be mitigated by additional audit effort.

KW - AUDITING fees

KW - BUSINESS enterprises

KW - AUDITORS

KW - LABOR unions

KW - STRIKES & lockouts

KW - UNITED States

KW - Audit fees

KW - Audit report

KW - Going-concern audit opinions

KW - Labor union

M3 - Journal Article (refereed)

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JO - Seoul Journal of Business

JF - Seoul Journal of Business

SN - 1226-9816

IS - 2

ER -