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Author : Sui-kwong Alan Ho
Publisher :
ISBN 13 :
Total Pages : 352 pages
Book Rating : 4.:/5 (32 download)
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:
Author : Ariel J. Markelevich
Publisher :
ISBN 13 :
Total Pages : 36 pages
Book Rating : 4.:/5 (129 download)
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.
Author : Erik Beardsley
Publisher :
ISBN 13 :
Total Pages : 49 pages
Book Rating : 4.:/5 (13 download)
Download or read book Evidence of a Nonlinear Association Between Auditor-Provided Non-Audit Services and Audit Quality written by Erik Beardsley and published by . This book was released on 2018 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the possibility of a nonlinear association between auditor-provided non-audit services (NAS) and audit quality. The effect of NAS on audit quality has been a long-standing debate among academics and regulators. One view is that NAS can potentially create economic bonding between the auditor and client, lowering audit quality. Another view is that NAS creates knowledge spillover, improving audit quality. Our unique approach provides evidence of a nonlinear association between NAS and audit quality, where client misstatement rates are higher for audit offices with both high and low levels of NAS. We also find a nonlinear association between NAS provision and both missed material weaknesses and meeting or beating analysts' consensus forecast by a small amount. This study should be of interest to audit firms, audit committees, and regulators because it advances our understanding of the effects of NAS on audit quality.
Author : Jong-Hag Choi
Publisher :
ISBN 13 :
Total Pages : 57 pages
Book Rating : 4.:/5 (129 download)
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.
Author : Richard M. Frankel
Publisher : Forgotten Books
ISBN 13 : 9780666794659
Total Pages : 94 pages
Book Rating : 4.7/5 (946 download)
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.
Author : 王旭升
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (899 download)
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:
Author : Patrick Krauss
Publisher :
ISBN 13 :
Total Pages : 37 pages
Book Rating : 4.:/5 (13 download)
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.
Author : Jeffrey Coulton
Publisher :
ISBN 13 :
Total Pages : 67 pages
Book Rating : 4.:/5 (13 download)
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.
Author : Hongkang Xu
Publisher :
ISBN 13 : 9781369061796
Total Pages : 104 pages
Book Rating : 4.0/5 (617 download)
Download or read book Differential Effects of Market Concentration on Oligopolistic and Atomistic Segments written by Hongkang Xu and published by . This book was released on 2016 with total page 104 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the first essay, I divide the local audit market into the oligopolistic segment and atomistic segment and examine whether the differential effect of audit market concentration on audit fees, audit quality, and auditor switch in these two segments. I find that the market concentration raises the audit fees, but lowers the audit quality in the oligopolistic segment. In contrast, the market concentration lowers audit fees, but raises the audit quality in the atomistic segment. Moreover, I find that market concentration reduces the probability of auditor switch in both oligopolistic and atomistic segments. My findings reveal that audit market concentration only reduces the competition among oligopolistic segment. In contrast, the atomistic segment becomes more compressed and more competitive in a highly concentrated market. I also examine the nonlinear association between the auditor's market share and audit quality. I find that the relation between the market share and audit quality is an inverted U-curve. The second essay examines (1) the effect of real activities manipulation (RAM) on the audit report lags, (2) the impact of RAM on the audit fee and audit quality of industry experts, and (3) the linkages between accrual-based earnings management (AM), RAM, and audit fees. I find that RAM is associated with longer audit report lags. I also find that industry specialist auditor charge higher audit fees and make a more constraining influence on AM when their clients engage in aggressive RAM. However, I do not find that RAM affects the association between AM and audit fees.
Author : Richard M. Frankel
Publisher :
ISBN 13 :
Total Pages : 44 pages
Book Rating : 4.:/5 (58 download)
Download or read book The Relation Between Auditors' Fees for Non-audit Services and Earnings Quality written by Richard M. Frankel and published by . This book was released on 2002 with total page 44 pages. Available in PDF, EPUB and Kindle. Book excerpt: We examine the association between the provision of non-audit services and earnings quality. Because of concerns regarding the effect of non-audit services on financial reporting credibility, the Securities and Exchange Commission recently issued revised auditor independence rules requiring firms to disclose in their annual proxy statement the amount of fees paid to auditors for audit and non-audit services. Using data collected from proxy statements filed between February 5, 2001 and June 15, 2001, we present evidence that firms purchasing more non-audit services from their auditor are more likely to just meet or beat analysts' forecasts and to report larger absolute discretionary accruals. However, the purchase of non-audit services is not associated with meeting other earnings benchmarks. We also find that the unexpected component of the non-audit to total fee ratio is negatively associated with stock returns on the filing date. These results are consistent with arguments that the provision of non-audit services strengthens an auditor's economic bond with the client and that investors price this effect. Keywords: Auditor independence; Auditor fees; Earnings management; Discretionary accruals. JEL Classification: G12, M41, M43, M49, L84.
Author : Bahaaeddin Alareeni
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (13 download)
Download or read book The Association Between Audit Firm Characteristics and Audit Quality written by Bahaaeddin Alareeni and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper uses Meta-Analysis technique to a set of previous empirical studies to investigate the relation between audit firm characteristics (e.g. audit fees, audit firm size, non-audit services, auditor-client tenure) and audit quality. Hunter et al. (1982) test is used as the Meta-Analysis technique for this study. A total of 51 published papers are gathered from 1992 to 2016. The findings show that there is a significant positive relationship between auditor-client tenure, audit fees and audit quality, whereas non-audit services and audit firm size have a significant negative relationship with the audit quality.
Author : Frankel Richard M
Publisher : Legare Street Press
ISBN 13 : 9781019501573
Total Pages : 0 pages
Book Rating : 4.5/5 (15 download)
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.
Author : Hyeesoo Hyun Chung
Publisher :
ISBN 13 :
Total Pages : 46 pages
Book Rating : 4.:/5 (129 download)
Download or read book Client Importance, Non-Audit Fees, and Abnormal Accruals written by Hyeesoo Hyun Chung and published by . This book was released on 2010 with total page 46 pages. Available in PDF, EPUB and Kindle. Book excerpt: We use data on audit and non-audit fees paid to auditors, disclosed in proxy statements under SEC auditor independence rules, to assess whether client importance to auditor is associated with abnormal accruals. Our sample consists of 1,864 clients of Big-5 audit firms that revealed audit and non-audit fees in proxy statements filed between February 5, 2001 and June 30, 2001, and had data in Compustat to estimate abnormal accruals using the modified-Jones model. We measure client importance by the ratio of client fees to the audit firm's total US revenues. In view of anecdotal evidence suggesting that non-audit services are more profitable to the auditor than are audit services, we use the ratio of non-audit fees from a client to the audit firm's US revenues as a second measure of client importance. We do not find a statistically significant evidence of an association between abnormal accruals and either of the client importance measures. We also do not find evidence of a statistically significant association between abnormal accruals and client importance in subsets of the sample partitioned by the extent of client incentives to manipulate earnings (proxied by high leverage and high market to book ratio), auditor expertise (proxied by whether the auditor is the industry specialist), and insider influence on the board of directors (proxied by whether the CEO is the chairman, and by the percentage of employee directors). Thus we are unable to find evidence of any association between client importance and abnormal accruals. However, it is possible that client importance is significantly related to abnormal accruals in other cases which we have not considered, and our results should be interpreted subject to this caveat.
Author : John Daniel Eshleman
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (13 download)
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.
Author : Rick Antle
Publisher :
ISBN 13 :
Total Pages : 55 pages
Book Rating : 4.:/5 (129 download)
Download or read book The Joint Determination of Audit Fees, Non-Audit Fees, And Abnormal Accruals written by Rick Antle and published by . This book was released on 2014 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: Prior research has estimated piece-meal the determinants of audit fees, non-audit fees and abnormal accruals. Intuition, informal analysis, and a variety of theories suggest that audit fees, non-audit fees, and abnormal accruals are jointly determined. We address this endogeneity issue by modeling the confluence of audit fees, fees for non-audit services and abnormal accruals in a system of simultaneous equations.Our joint estimation provides a starting point to look simultaneously at several competing theories. Using audit and non-audit fee data from the UK for 1994-2000, we find evidence consistent with knowledge spillovers (or economies of scope) from auditing to non-audit services and from non-audit services to auditing. While knowledge spillovers from non-audit services to auditing have been found in prior research [e.g. see Simunic 1984], the presence of knowledge spillovers from auditing to non-audit services is a new result. Contrary to recent results in Ferguson et al. (2001) and Frankel et al. (2002), we do not find support for the assertion that fees for non-audit services increase abnormal accruals. In fact, contrary to the results in Ashbaugh et al. (2003) and Chung and Kallapur (2003), we find that non-audit fees decrease abnormal accruals, which we attribute to the productive effects of non-audit services. We also find evidence that audit fees increase abnormal accruals, consistent with behavioral theories of unconscious influence or bias in the auditor-client relation. The findings are robust to tests with US data.
Author : Lawrence Abbott
Publisher :
ISBN 13 :
Total Pages : 0 pages
Book Rating : 4.:/5 (137 download)
Download or read book The Effect of Audit Committee Characteristics and Non-Audit Fees on Audit Fees written by Lawrence Abbott and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the association between audit committee characteristics and audit fees, using data gathered under the recent SEC fee disclosure rules. We hypothesize that audit fees will be higher in the presence of an active and independent audit committee. Our base our hypothesis upon two premises. First, we argue that independent and active audit committees demand a higher level of audit quality due to concerns about monetary or reputational losses arising from financial misstatements. This higher audit quality demand may manifest itself in a higher amount of audit coverage, which, in turn should result in a concomitantly higher audit fee. Second, independent and active audit committees may give rise to greater auditor fee bargaining power. We examine a sample of 262 non-regulated, Big 5-audited firms that filed both 10-K and proxy forms with the SEC in the period from 2/5/2001 to 3/23/2001. Audit committees comprised solely of independent directors that meet at least four times annually are significantly, positively associated with audit fees. This evidence is consistent with audit committee members taking actions within their span of control to ensure a higher level ofaudit coverage, as well as facilitating auditor independence. Finally, we also examine the impact of non-audit fees on audit fees. We document a significantly positive association between audit fees and non-audit fees, consistent with prior research from the early 1980's.
Author : Scott Whisenant
Publisher :
ISBN 13 :
Total Pages : pages
Book Rating : 4.:/5 (129 download)
Download or read book Evidence on the Joint Determination of Audit and Non-Audit Fees written by Scott Whisenant and published by . This book was released on 2005 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this study, we investigate whether the characteristics of clients, auditors, and the auditor-client relationship simultaneously determine audit and non-audit fees. As done in prior studies, we maintain that fees proxy for the level of service provided and follow the physical flow of knowledge. Estimating single-equation models of audit and non-audit fee models, we confirm prior findings of an association between audit and non-audit fees. Studies have concluded such evidence is consistent with knowledge spillovers between the two services. However, we document empirically that audit and non-audit fees are simultaneously determined. Since the data indicate audit and non-audit fees are jointly determined, we then investigate whether previously documented associations between audit and non-audit fees are the result of biased estimation induced by using endogenous variables in single-equation models. In contrast to results from single-equation estimations, we find no association between audit and non-audit fees using a simultaneous specification of the fee system, suggesting that single-equation estimations suffer from simultaneous-equations bias. In sum, the findings are not consistent with the existence of economies of scope from the joint performance of audit and non-audit services after controlling for the joint behavior of audit and non-audit fees. Given the ongoing debate over the level of allowed non-audit services by auditors, the argument for the joint provision of audit and non-audit services is less justified than if joint-supply benefits had been documented.
