Pricing the Audit Risk of Innovation: Intangibles and Patents
The economic literature documents that the investment rate in intangible assets, including intellectual property (IP), has far outpaced that of tangible assets for several decades. In this context, our research delves into the impact of self-created intangible assets on the auditor’s risk assessment...
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MDPI AG
2025-03-01
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| Series: | International Journal of Financial Studies |
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| Online Access: | https://www.mdpi.com/2227-7072/13/1/42 |
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| author | Daqun Zhang Donald R. Deis Hsiao-Tang Hsu |
| author_facet | Daqun Zhang Donald R. Deis Hsiao-Tang Hsu |
| author_sort | Daqun Zhang |
| collection | DOAJ |
| description | The economic literature documents that the investment rate in intangible assets, including intellectual property (IP), has far outpaced that of tangible assets for several decades. In this context, our research delves into the impact of self-created intangible assets on the auditor’s risk assessment. We present compelling evidence that, on average, research and development (R&D) knowledge capital is associated with higher audit fees. Using patent-based metrics as the proxies for innovation outcomes, we reveal that the number of patents (quantity), patent citations (quality-adjusted quantity), and patent technology classes (scope) all positively correlate with audit fees. Additional analyses show that innovation efficiency is negatively associated with audit fees. Furthermore, firms with a higher intensity of knowledge capital are more likely to receive going concern opinions than those with significant innovation outcomes. These findings provide valuable insights into the complex relationship between intangible assets and audit risk assessment. |
| format | Article |
| id | doaj-art-0c92113e79564ccc9633cc1f8a5b3914 |
| institution | DOAJ |
| issn | 2227-7072 |
| language | English |
| publishDate | 2025-03-01 |
| publisher | MDPI AG |
| record_format | Article |
| series | International Journal of Financial Studies |
| spelling | doaj-art-0c92113e79564ccc9633cc1f8a5b39142025-08-20T02:42:31ZengMDPI AGInternational Journal of Financial Studies2227-70722025-03-011314210.3390/ijfs13010042Pricing the Audit Risk of Innovation: Intangibles and PatentsDaqun Zhang0Donald R. Deis1Hsiao-Tang Hsu2Department of Accounting, Finance, & Business Law, College of Business, Texas A&M University-Corpus Christi, 6300 Ocean Drive, Unit 5808, Corpus Christi, TX 78412, USADepartment of Accounting, Finance, & Business Law, College of Business, Texas A&M University-Corpus Christi, 6300 Ocean Drive, Unit 5808, Corpus Christi, TX 78412, USADepartment of Accounting, Finance, & Business Law, College of Business, Texas A&M University-Corpus Christi, 6300 Ocean Drive, Unit 5808, Corpus Christi, TX 78412, USAThe economic literature documents that the investment rate in intangible assets, including intellectual property (IP), has far outpaced that of tangible assets for several decades. In this context, our research delves into the impact of self-created intangible assets on the auditor’s risk assessment. We present compelling evidence that, on average, research and development (R&D) knowledge capital is associated with higher audit fees. Using patent-based metrics as the proxies for innovation outcomes, we reveal that the number of patents (quantity), patent citations (quality-adjusted quantity), and patent technology classes (scope) all positively correlate with audit fees. Additional analyses show that innovation efficiency is negatively associated with audit fees. Furthermore, firms with a higher intensity of knowledge capital are more likely to receive going concern opinions than those with significant innovation outcomes. These findings provide valuable insights into the complex relationship between intangible assets and audit risk assessment.https://www.mdpi.com/2227-7072/13/1/42innovationknowledge capitalintangiblespatentsaudit riskaudit fees |
| spellingShingle | Daqun Zhang Donald R. Deis Hsiao-Tang Hsu Pricing the Audit Risk of Innovation: Intangibles and Patents International Journal of Financial Studies innovation knowledge capital intangibles patents audit risk audit fees |
| title | Pricing the Audit Risk of Innovation: Intangibles and Patents |
| title_full | Pricing the Audit Risk of Innovation: Intangibles and Patents |
| title_fullStr | Pricing the Audit Risk of Innovation: Intangibles and Patents |
| title_full_unstemmed | Pricing the Audit Risk of Innovation: Intangibles and Patents |
| title_short | Pricing the Audit Risk of Innovation: Intangibles and Patents |
| title_sort | pricing the audit risk of innovation intangibles and patents |
| topic | innovation knowledge capital intangibles patents audit risk audit fees |
| url | https://www.mdpi.com/2227-7072/13/1/42 |
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