Responsiveness of Auditors to the Audit Risk Standards: Unique Evidence from Big 4 Audit Firms

Lasse Niemi, W.Robert Knechel, Hannu Ojala, Jill Collis

Research output: Contribution to journalArticleScientificpeer-review

10 Citations (Scopus)


We examine the effect of changes in audit risk standards on the conduct of financial statement audits in a European setting. We investigate this by analysing the audit hours and audit fees for clients of Big 4 audit firms in Finland in 1996 and 2010. Our results show that audit firms became more sensitive to clients’ business risk due to the introduction of the new audit risk standards, with more audit hours allocated to owner-managed companies in 2010 than in 1996, and fewer audit hours allocated to low-risk clients in 2010 than in 1996. Also, the labour mix in the audit team changed for owner-managed companies, with a greater work load carried by junior auditors in 2010 than in 1996. Regarding the price of audit, we find an increase in audit fees for clients with high business risk, while audit fees remained at roughly the same level for low-risk clients. These findings should be of interest to the auditing profession and those involved in the development of auditing regulations.
Original languageEnglish
Pages (from-to)33-54
JournalAccounting in Europe
Issue number1
Publication statusPublished - 2 Jan 2018
MoE publication typeA1 Journal article-refereed


  • audit effort
  • audit regulation
  • audit risk
  • business risk approach


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