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Auditor Fees Abnormal Fees And Audit Quality Before And After The Sarbanes Oxley Act
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Book Synopsis Auditor Fees, Abnormal Fees and Audit Quality Before and after the Sarbanes-Oxley Act by : Ariel J. Markelevich
Download or read book Auditor Fees, Abnormal Fees and Audit Quality Before and after the Sarbanes-Oxley Act written by Ariel J. Markelevich and published by . This book was released on 2010 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: Our study examines fees paid to auditors for audit and non-audit services during the period 2000 to 2003. We document a statistically significant positive association between audit fees and the absolute value of performance-adjusted discretionary accruals over all years. We also identify a significant positive association between non-audit fees and discretionary accruals in years 2000 and 2001, but no such association in later years (after passage of the Sarbanes-Oxley Act). This lack of association in 2002 and 2003 may be a result of legislation that limits the types of non-auditing services that auditors can provide to audit clients. To address the potential impact of fee composition and client importance on auditor independence, we extend our empirical analysis by incorporating predictions of abnormal audit and non-audit fees. We derive abnormal fees using a fee estimation model drawn from prior literature. We find evidence consistent with the view that clients with higher abnormal fees are more apt to exert influence on their auditors, which in turn may lead to a breach in auditor independence. Overall, our results are most consistent with economic bonding being the primary determinant of auditor behavior.
Book Synopsis Relationship Between Abnormal Audit Fees and Audit Quality After SOX. by : 王旭升
Download or read book Relationship Between Abnormal Audit Fees and Audit Quality After SOX. written by 王旭升 and published by . This book was released on 2013 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Understanding Accounting Academic Research by : Stephen R. Moehrle
Download or read book Understanding Accounting Academic Research written by Stephen R. Moehrle and published by Emerald Group Publishing. This book was released on 2013-06-25 with total page 298 pages. Available in PDF, EPUB and Kindle. Book excerpt: Accounting scandals such as Enron and WorldCom ushered in several regulatory overhauls including Sarbanes-Oxley. This monograph summarizes and synthesize a decade of academic research to develop an evolving dominant explanation around these myriad changes.
Book Synopsis The Impact of Regulation on Auditor Fees by : Aloke Ghosh
Download or read book The Impact of Regulation on Auditor Fees written by Aloke Ghosh and published by . This book was released on 2015 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine changes in fees paid to auditors around the Sarbanes-Oxley Act (SOX, 2002). Audit fees are expected to increase after SOX due to both increased audit effort and potentially increased auditors' legal liability. Our results indicate an economically large increase in audit fees following the enactment of SOX. Controlling for size of the auditor, auditor's opinion, and client characteristics, we find that audit fee levels went up approximately 74 percent in the post-SOX period. In contrast, non-audit fees declined significantly over the same period. Total fees went up during this period because the increase in audit fees offset the decline in non-audit fees. Our conclusions remain unchanged when we use audit fee change regressions. Additionally, we find that the Big 4 audit firms increased audit fees by 42 percent more than their smaller counterparts. Further, we find that while small and large audit firms discount fees on initial engagements to attract new clients for the pre-SOX period, only small audit firms continue of offer fee discounts for the post-SOX years. Our results remain robust even after a battery of sensitivity analyses.
Book Synopsis Abnormal Audit Fees and Audit Quality by : Patrick Krauss
Download or read book Abnormal Audit Fees and Audit Quality written by Patrick Krauss and published by . This book was released on 2015 with total page 37 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study investigates the economic auditor-client dependency issue by examining the association between abnormal audit fee pricing and audit quality. Our study is the first to analyze this phenomenon empirically for the institutional setting of German IFRS firms by using a sample of 2,334 firm-year observations for the period from 2005 to 2010. Our empirical results demonstrate that positive abnormal audit fees are negatively associated with audit quality and imply that the audit fee premium is a significant indicator of compromised auditor independence due to economic auditor-client bonding. Audit fee discounts generally do not lead to a reduced audit effort, or respectively, audit quality is not impaired when client bar-gaining power is strong. The association of positive abnormal audit fees and audit quality is robust to different audit quality surrogates such as absolute discretionary accruals, financial restatements, and meeting or beating analysts' earnings forecasts.
Book Synopsis Abnormal Audit Fees and Accounting Quality by : Jeffrey Coulton
Download or read book Abnormal Audit Fees and Accounting Quality written by Jeffrey Coulton and published by . This book was released on 2016 with total page 67 pages. Available in PDF, EPUB and Kindle. Book excerpt: We provide evidence that distinguishes between competing production cost-based explanations of how to interpret unusually high (or low) audit fees and their expected relation with accounting quality. Abnormally high or low fees are typically proxied by the residuals obtained from fee models. Whereas prior research assumes these residuals are independent from one year to the next, we argue that the inherent “stickiness” in audit fee residuals also means that measures of unexpected fees will be serially correlated. Our results strongly support this view, and suggest that audit fee residuals reflect a limitation of the standard audit fee model in capturing attributes of the auditing environment that are not well captured at the client-firm level. However, we also argue that the extent to which residual fees differ from the recent past can clarify their relation to accounting quality. We show that the “jump” in fee residuals relative to their long-run “sticky” average is strongly associated with lower accounting quality. Hence, a “jump” in fee residuals is a suitable proxy for lower accounting quality, as it likely reflects reactive auditor effort and/or an additional risk premium. We then show that long-run fee residuals are also negatively associated with subsequent accounting quality, a result which further contradicts the argument that higher abnormal audit fees capture increased proactive effort and therefore reflect “investments in auditing”. Overall, our results suggest that risk, rather than proactive effort, is a better explanation for higher than expected audit production costs.
Book Synopsis The Association between Audit Quality and Abnormal Audit Fees by : Jong-Hag Choi
Download or read book The Association between Audit Quality and Abnormal Audit Fees written by Jong-Hag Choi and published by . This book was released on 2013 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a sample of 9,820 firm-year observations over the 2000-2003 period, this paper examines whether, and how, audit quality proxied by unsigned discretionary accruals is associated with the abnormal audit fee, i.e., the difference between actual audit fee and auditors' expectation on the normal level of fee. The results of various regressions reveal that the association between the two is insignificant for the full sample, significantly positive for the subsample of clients with positive abnormal fees, and insignificantly negative for the subsample of clients with negative abnormal fees. The above results suggest that auditors' incentives to compromise audit quality differ systematically depending on whether the clients pay more than or less than the normal level of audit fees, which in turn leads to the audit fee-audit quality association being conditioned on the sign of abnormal audit fees. Our results are robust to a battery of sensitivity checks. Relevant implications of our results to policy makers and academic researchers are discussed.
Book Synopsis Internal Controls Quality and Audit Pricing Under the Sarbanes-Oxley Act by : Rani Hoitash
Download or read book Internal Controls Quality and Audit Pricing Under the Sarbanes-Oxley Act written by Rani Hoitash and published by . This book was released on 2012 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper extends prior research on audit risk adjustment by examining the association of audit pricing with problems in internal control over financial reporting, disclosed under Sections 404 and 302 of the Sarbanes-Oxley Act. While studies of auditors' responses to internal control risk provide mixed evidence, it is important to re-examine this issue using data on specific client problems not available prior to SOX. As a baseline, we first establish a strong association of audit fees with internal control problems disclosed in the first year of implementation of Section 404, consistent with prior research (e.g., Raghunandan and Rama 2006). We then address two issues on which prior results are contradictory. In a broadly-based sample of accelerated filers, we find that audit pricing for companies with internal control problems varies by problem severity, when severity is measured either as material weaknesses vs. significant deficiencies, or by nature of the problem. Also, while audit fees increase during the 404 period, our tests show less relative risk adjustment under Section 404 than under Section 302 in the prior year. Further examining intertemporal effects, we find that companies disclosing internal control problems under Section 302 continue to pay higher fees the following year, even if no problems are disclosed under Section 404. Overall, our findings provide detailed insight into audit risk adjustment during the initial period of SOX implementation.
Book Synopsis The Relation Between Auditors' Fees for Non-Audit Services and Earnings Quality (Classic Reprint) by : Richard M. Frankel
Download or read book The Relation Between Auditors' Fees for Non-Audit Services and Earnings Quality (Classic Reprint) written by Richard M. Frankel and published by Forgotten Books. This book was released on 2018-03-03 with total page 94 pages. Available in PDF, EPUB and Kindle. Book excerpt: Excerpt from The Relation Between Auditors' Fees for Non-Audit Services and Earnings Quality This paper provides empirical evidence on the relation between non-audit services and earnings quality. We test hypotheses concerning: (1) the association between a firm's purchase of non-audit services from its auditor and earnings management, and (2) the stock price reaction to the disclosure of non-audit fees. In the past decade there has been a dramatic increase in the proportion of fee revenue auditors derive from non-audit services, yet we know little about how non-audit services are related to earnings quality.1 Concern about the effect of non-audit services on the financial reporting process was a primary motivation for the Securities and Exchange Commission (sec) to issue revised auditor independence rules on November 15, 2000. The rules require firms to disclose the amount of all audit and non-audit fees paid to its auditor. About the Publisher Forgotten Books publishes hundreds of thousands of rare and classic books. Find more at www.forgottenbooks.com This book is a reproduction of an important historical work. Forgotten Books uses state-of-the-art technology to digitally reconstruct the work, preserving the original format whilst repairing imperfections present in the aged copy. In rare cases, an imperfection in the original, such as a blemish or missing page, may be replicated in our edition. We do, however, repair the vast majority of imperfections successfully; any imperfections that remain are intentionally left to preserve the state of such historical works.
Book Synopsis Auditor Fees Around Dismissals and Resignations by : Paul A. Griffin
Download or read book Auditor Fees Around Dismissals and Resignations written by Paul A. Griffin and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper offers new findings on the relation between auditor dismissals and resignations and audit fees. Unlike the prior research, which studies the fees of auditors after an auditor change, we focus on audit fees before an auditor change. Our evidence shows that incumbent auditors charge unusually higher fees at least one year prior to an auditor change event. The existence of unusual fee adjustments by incumbents may serve as a precursor of such events. In the case of dismissals, we reason that if clients perceive the presence of unusually higher audit fees as an indication that their costs are excessive, this should prompt a switch in auditors. We find evidence consistent with this view. For resignations, we interpret unusually higher incumbent fees not as a sign of client-perceived excess but as a signal by auditors that resignation companies reflect higher levels of audit risk or liability, which incumbents capture as additional fees. Eventually, however, the additional fees are insufficient, and the auditor resigns. While our results are based mostly on the audit fee disclosures after Sarbanes-Oxley, we control for and find similar results for periods not dominated by the legislation. Our results are similar for each of the Big 4 firms.
Book Synopsis The Nonlinear Association Between Abnormal Audit Fees and Audit Quality by : Sui-kwong Alan Ho
Download or read book The Nonlinear Association Between Abnormal Audit Fees and Audit Quality written by Sui-kwong Alan Ho and published by . This book was released on 2008 with total page 352 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Research in Accounting Regulation by : Gary Previts
Download or read book Research in Accounting Regulation written by Gary Previts and published by Elsevier. This book was released on 2003-05-21 with total page 317 pages. Available in PDF, EPUB and Kindle. Book excerpt: Research in Accounting Regulation
Book Synopsis Abnormal Audit Fees and Audit Quality by : John Daniel Eshleman
Download or read book Abnormal Audit Fees and Audit Quality written by John Daniel Eshleman and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Are high audit fees a signal that the auditor exerted more effort or a signal that the auditor may be losing her independence? Prior literature offers conflicting evidence. In this paper, we re-examine the issue on a sample of clients who have both the incentive and the ability to use discretionary accruals to meet or beat the consensus earnings forecast. We find a negative relationship between the level of abnormal audit fees paid by the client and the likelihood of using discretionary accruals to meet or beat the consensus analyst forecast. The evidence is consistent with the notion that abnormal audit fees are indicative of greater effort on the engagement. In other words, the results suggest a positive relationship between abnormal audit fees and audit quality. We show that the conflicting evidence in prior research was caused by research designs which did not consider the incentives of the manager.
Book Synopsis The Effects of Auditor Dismissals and Resignations on Audit Fees by : Paul A. Griffin
Download or read book The Effects of Auditor Dismissals and Resignations on Audit Fees written by Paul A. Griffin and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper assesses the effects of auditor dismissals and resignations on audit fees and, in particular, whether companies pay more or less for their audits around these events. We also test the hypotheses that the fee discount around a dismissal can be explained by the benefits of auditor incumbency and the fee premium around a resignation varies in relation to the additional audit effort and litigation risk of the incoming auditor. We base our study on a comprehensive sample of audit fee disclosures made by SEC registrants during fiscal years 2000 to 2004, so that our study period includes auditor changes before and after the Sarbanes-Oxley (SOX) legislation. For dismissals, we find that not only does the successor auditor discount fees, and in a way that supports our discounting hypothesis, but also that fees are discounted one year before the auditor change by the incumbent auditor, consistent with the view that the threat of a dismissal may influence fees. For resignations, fees are higher one year before and after the event indicating that both the incumbent and incoming auditor charge a premium around a resignation, possibly because the new auditor needs to cope with greater than normal litigation risk and/or audit effort. SOX appears not to have affected discounting around a dismissal, but the fee premium around a resignation increases following the legislation, consistent with our resignation hypothesis. We also find that non-audit fees are discounted around a dismissal, and this result too appears to be unchanged by SOX.
Book Synopsis The Big Four Audit Fee Premium After Sarbanes-oxley Act by : Meng Li
Download or read book The Big Four Audit Fee Premium After Sarbanes-oxley Act written by Meng Li and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Many prior studies have examined whether large auditing firms charge higher fees, which is known as the audit fee premium. The amount of fee premium varies significantly from different studies, ranging from 0% to 63%. Large fee premium can be a temporary effect caused by audit market change, such as mergers. Or it can be long-term effect that signals the lack of competition in the audit market and the dominant power of large auditors. Most recent studies have focused on how Sarbanes-Oxley Act affects the fee premium. They find an increasing audit fee premium immediately after the Sarbanes-Oxley Act (SOX). In a study, Ebrahim (2010) conclude that the fee premium gradually declines as he observe the decline of fee premium in 2005 and 2006. However, his sample period ends 2006; and hence his results show only the short-term effect of the SOX. The long-term effect might not be the same as the short-term effect. To address the sample period limitation, this study extends the sample period to 2014 and finds the opposite results to Ebrahim's study. Three models, OLS regression, Heckman two-stage self-selection and semi-parametric matching models, are used to estimate the premium. The results of all three models suggest the overall premium from 2000 to 2014 of 29.4%. The results of OLS regression and the semi-parametric matching model suggest that the fee premium does not decline, but continues to increase, after 2006. The results indicate the unequal power between large and small auditors should raise the market's attention and encourage more investigations on the causes.
Book Synopsis The Relation Between Auditors' Fees for Non-audit Services and Earnings Quality by : Frankel Richard M
Download or read book The Relation Between Auditors' Fees for Non-audit Services and Earnings Quality written by Frankel Richard M and published by Legare Street Press. This book was released on 2023-07-18 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This groundbreaking study explores the relationship between auditors' fees for non-audit services and the quality of earnings reported by companies. Using data from a large sample of publicly traded firms, the authors show that there is a strong correlation between the two variables, and suggest that this could be a cause for concern for investors and regulators. The authors also provide recommendations for improving the transparency and reliability of financial reporting. This book is essential reading for anyone interested in the intersection of accounting, auditing, and corporate governance. This work has been selected by scholars as being culturally important, and is part of the knowledge base of civilization as we know it. This work is in the "public domain in the United States of America, and possibly other nations. Within the United States, you may freely copy and distribute this work, as no entity (individual or corporate) has a copyright on the body of the work. Scholars believe, and we concur, that this work is important enough to be preserved, reproduced, and made generally available to the public. We appreciate your support of the preservation process, and thank you for being an important part of keeping this knowledge alive and relevant.
Book Synopsis An Analysis of Audit Fees Following the Passage of Sarbanes-Oxley by : Paul A. Griffin
Download or read book An Analysis of Audit Fees Following the Passage of Sarbanes-Oxley written by Paul A. Griffin and published by . This book was released on 2008 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study analyzes audit fees following SOX, in particular, the residual increase in audit fees controlling for those factors predicted to change such fees but for the Act. We find significant relations between residual audit fees and incremental audit risk, audit effort, and auditor changes. These factors are noticeably more influential in the period following SOX that includes the implementation of section 404 on internal control. Our results imply that SOX most likely caused an increase in the auditing profession's share of the risk of defective financial statements and client companies' resources to audit a costlier accounting system.
