The Association between Audit Fees and Client-Firms' Attributes of Earnings

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)32_Refereed conference paper (no ISBN/ISSN)peer-review

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Original languageEnglish
Publication statusPublished - 6 Aug 2011

Conference

Title2011 American Accounting Association Annual Meeting
PlaceUnited States
CityDenver
Period6 - 10 August 2011

Abstract

This study investigates the effect on the audit fees of a client-firm’s earnings quality. Specifically, we postulate that more desirable attributes of earnings, measured by seven comprehensive measures of accrual quality, earnings persistence, predictability, smoothness, value relevance, timeliness, and conservatism, are associated with the lower audit risk in verifying the client-firm’s financial reports, proxied by a lower audit fee. Empirical results for a large sample of U.S. publicly listed firms support the hypothesis that auditors in general charge lower audit fees to firms with more desirable attributes of earnings than to firms with less favorable earnings qualities. The results also suggest that auditors give more weight to the earnings attributes caused by economic fundamentals (innate sources) than those induced by management choices (discretionary sources) in assessing audit risk, which in turn is reflected in the audit fees

Citation Format(s)

The Association between Audit Fees and Client-Firms' Attributes of Earnings. / Choi, JongHag; KIM, Chansog; Kim, Jeong-Bon; Zang, Yoonseok.

2011. Paper presented at 2011 American Accounting Association Annual Meeting, Denver, United States.

Research output: Conference Papers (RGC: 31A, 31B, 32, 33)32_Refereed conference paper (no ISBN/ISSN)peer-review