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Audit firm assessments of cyber-security risk: evidence from audit fees and SEC comment letters

Rosati, Pierangelo orcid logoORCID: 0000-0002-6070-0426, Gogolin, Fabian and Lynn, Theo orcid logoORCID: 0000-0001-9284-7580 (2019) Audit firm assessments of cyber-security risk: evidence from audit fees and SEC comment letters. International Journal of Accounting, 54 (3). ISSN 0020-7063

Abstract
This study investigates the impact of cyber-security incidents on audit fees. Using a sample of 5,687 firms, we find that (i) breached firms are charged 12 percent higher audit fees, and (ii) firms operating in the same industry of a breached firm are charged 5 percent higher fees. Finally, using a difference-indifference regression on a propensity score matched sample, we provide evidence suggesting that auditors do not revise their audit risk assessment following a breach. Overall, these results suggest that the increase in audit fees in the year of a breach is only temporary, and that auditors include cyber-security risk in their audit risk assessment even before an incident occurs. Higher cyber-security risk is ultimately reflected in higher audit fees paid by auditees.
Metadata
Item Type:Article (Published)
Refereed:Yes
Additional Information:Article number 1950013
Uncontrolled Keywords:Audit risk; audit fees; cyber security; SEC comment letters
Subjects:Business > Accounting
DCU Faculties and Centres:DCU Faculties and Schools > DCU Business School
Research Institutes and Centres > Irish Centre for Cloud Computing and Commerce (IC4)
Publisher:World Scientific Publishing
Official URL:http://dx.doi.org/10.1142/S1094406019500136
Copyright Information:© 2019 World Scientific Publishing
Use License:This item is licensed under a Creative Commons Attribution-NonCommercial-Share Alike 3.0 License. View License
ID Code:24776
Deposited On:14 Jul 2020 10:34 by Pierangelo Rosati . Last Modified 19 Sep 2020 03:30
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