The Effect of Audit Client Assets Tangibility on Audit Risk: An Empirical Study on Nonfinancial Firms Listed on the EGX

نوع المستند : المقالة الأصلية

المؤلف

Accounting Department, Faculty of Business, Alexandria University

المستخلص

Purpose – The objective of this research is to study and examine the association between the audit risk assessment and the degree of audit client assets tangibility. Additionally, it investigates the moderating influence of the audit firm's reputation on this relationship.

Design/Methodology – The underlying research hypotheses are tested using a sample of 90 nonfinancial firms listed on the Egyptian Stock Exchange (EGX) throughout 2017-2019, and using simple and multiple regressions.

Findings – The degree of assets tangibility has a substantial impact on the assessment of audit risk, as indicated by a score out of 6 indicators obtained from the auditees' financial statements. This significant influence differs depending on the audit firm's reputation, which is ranked into 4 tiers, with the big 4 making up the first. Moreover, these conclusions are valid because they are supported by the results of other analyses.

Research Limitations– The research is restricted geographically by utilizing a sample of nonfinancial firms listed on the EGX. Concerning the time-frame boundaries, the researcher has taken into account that the study period is after the introduction of IFRS in Egypt in 2015 and before the widespread of Covid 19. Regarding the technical limitations, the research is limited to investigating a specific type of audit client complexity which is related to assets tangibility.

Originality/value – To the extent that the researcher is aware, there is relatively little research on assets tangibility in the Egyptian context. The results of this research have various implications for academics, auditors, and legislative bodies.

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