Cannabis financial statement audits in Canada before and after legalization: A “joint” analysis

IF 3.3 3区管理学 Q1 BUSINESS, FINANCE Journal of Accounting and Public Policy Pub Date : 2023-11-01 DOI:10.1016/j.jaccpubpol.2023.107153

James D. Brushwood , Michelle A. Draeger , Eric T. Rapley

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Abstract

Cannabis has become a multi-billion-dollar worldwide industry and presents accountants with unique challenges and opportunities. This descriptive study examines characteristics of financial statement audits for this budding industry in Canada, one of the first countries to legalize recreational adult use of cannabis. Consistent with cannabis audit clients having higher risk, we find they incur more audit fees before and after legalization than a matched sample of non-cannabis companies. Cannabis companies also pay more non-audit fees before and after legalization, consistent with additional business opportunities for their auditors. The size of cannabis companies grew substantially after Canada’s 2018 legalization, corresponding with increased occurrences of Big 4 cannabis company audits. However, compared to a matched sample of non-cannabis companies and controlling for size, cannabis companies are less (more) likely to be audited by a Big 4 (second-tier) firm. This observation is likely attributed to the reputation risk from being associated with a cannabis client, which is potentially higher for Big 4 firms than second-tier firms.

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加拿大大麻合法化前后的财务报表审计:“联合”分析

大麻已经成为一个数十亿美元的全球产业，给会计师带来了独特的挑战和机遇。本描述性研究考察了加拿大这个新兴行业的财务报表审计特征，加拿大是第一个将娱乐成人使用大麻合法化的国家之一。与大麻审计客户的风险较高一致，我们发现他们在合法化前后比非大麻公司的匹配样本产生更多的审计费用。大麻公司在合法化前后还支付了更多的非审计费用，这与审计师获得的额外商机相一致。在加拿大2018年大麻合法化后，大麻公司的规模大幅增长，与此相对应的是，四大大麻公司的审计次数也有所增加。然而，与非大麻公司的匹配样本和控制规模相比，大麻公司接受四大(二线)公司审计的可能性更小(更大)。这一观察结果可能归因于与大麻客户有关的声誉风险，对于四大律所来说，这可能比二线律所更高。

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来源期刊

Journal of Accounting and Public Policy Multiple-

CiteScore

4.80

自引率

2.80%

发文量

期刊介绍： The Journal of Accounting and Public Policy publishes research papers focusing on the intersection between accounting and public policy. Preference is given to papers illuminating through theoretical or empirical analysis, the effects of accounting on public policy and vice-versa. Subjects treated in this journal include the interface of accounting with economics, political science, sociology, or law. The Journal includes a section entitled Accounting Letters. This section publishes short research articles that should not exceed approximately 3,000 words. The objective of this section is to facilitate the rapid dissemination of important accounting research. Accordingly, articles submitted to this section will be reviewed within fours weeks of receipt, revisions will be limited to one, and publication will occur within four months of acceptance.