Equation (5) was solved (by numerical methods)'"* for each of the 53 family businesses using baseline values of the interest rate and the beta scaling factor of 6 percent and 0.01, respectively. The distribution of optimal („ for the baseline case is illustrated in Figure 3. The mean value of optimal /„ is 13.4 months and the standard deviation is 5.1 months. Equation (5) ensures that riskier firms, larger firms, and firms with smaller audit fees, holding all other factors constant in each case, have shorter optimal audit intervals. Higher risk implies a higher rate at which losses accrue in the absence of an audit and therefore requires a shorter audit interval, for a given audit fee and total asset value. Similarly, higher total assets implies greater potential loss in the absence of an audit and therefore requires a shorter audit interval for a given risk and audit fee.
Equation (5) was solved (by numerical methods)'"* for each of the 53 family businesses using baseline values of the interest rate and the beta scaling factor of 6 percent and 0.01, respectively. The distribution of optimal („ for the baseline case is illustrated in Figure 3. The mean value of optimal /„ is 13.4 months and the standard deviation is 5.1 months. Equation (5) ensures that riskier firms, larger firms, and firms with smaller audit fees, holding all other factors constant in each case, have shorter optimal audit intervals. Higher risk implies a higher rate at which losses accrue in the absence of an audit and therefore requires a shorter audit interval, for a given audit fee and total asset value. Similarly, higher total assets implies greater potential loss in the absence of an audit and therefore requires a shorter audit interval for a given risk and audit fee.
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