This article was published on the Financial Executives International (FEI) website on 2/11/2015.
Financial reporting from family-owned firms is cheaper, more accurate and of an overall better quality than other types of companies, according to a new study.
“Our findings provide compelling evidence in favor of the explanation that auditors charge less from family firms because of superior reporting quality, which lowers audit risk and, therefore, the need for greater audit investments,” concludes a study conducted by Professor Al (Aloke) Ghosh, Professor of Accountancy at the Zicklin School of Business at Baruch College in New York.
The paper was recently accepted for publication in the Journal of Accounting and Economics.
The study focuses on pricing of audit engagements as a proxy for disclosure quality, arguing that because financial reporting quality affects audit risk, that robust financial disclosure will be reflected in how auditors price engagements. Read the full story.
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