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<p>We investigate whether the contracting laws and enforcement mechanisms of a country’s legal system differentially affect the assurance services audit for international companies registered in the U.S. We use an index that measures the extent of standardization of a country’s disclosure laws, a proxy for the private litigation framework, and an index that measures the strength of a country’s public enforcement body, a proxy for the public litigation framework. We find the extent of standardization of a country’s disclosure laws is positively related to audit fees, audit quality, and auditor selection, suggesting that more extensive, standardized home-country disclosure laws broaden the scope of the assurance audit for listing in U.S. markets. We also find the strength of a country’s public enforcement body is negatively related to audit fees, audit quality and auditor selection, suggesting the oversight provided by a public enforcer in the home-country can substitute for the assurance provided by auditors.</p>

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The effect of the legal environment on assurance services: evidence from international registrants in U.S. capital markets

  • 期刊论文

  • 发表日期：

    2025年2月8日

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  • Anthony Amoruso,
  • Edward B. Douthett Jr.,
  • Jonathan Duchac

摘要

We investigate whether the contracting laws and enforcement mechanisms of a country’s legal system differentially affect the assurance services audit for international companies registered in the U.S. We use an index that measures the extent of standardization of a country’s disclosure laws, a proxy for the private litigation framework, and an index that measures the strength of a country’s public enforcement body, a proxy for the public litigation framework. We find the extent of standardization of a country’s disclosure laws is positively related to audit fees, audit quality, and auditor selection, suggesting that more extensive, standardized home-country disclosure laws broaden the scope of the assurance audit for listing in U.S. markets. We also find the strength of a country’s public enforcement body is negatively related to audit fees, audit quality and auditor selection, suggesting the oversight provided by a public enforcer in the home-country can substitute for the assurance provided by auditors.