The Relationship between Abnormal Audit Fees and Audit Quality after SOX

• Main Authors: Iok-Seng Wong, 王旭升
• Other Authors: 林嬋娟
• Format: Others
• Language: en_US
• Published: 2013
• Online Access: http://ndltd.ncl.edu.tw/handle/17679092261452079797

碩士 === 國立臺灣大學 === 會計學研究所 === 101 === This study re-examines the relationship between abnormal audit fees and audit quality in the period after the Sarbanes-Oxley Act of 2002 (SOX). After SOX, the audit committee will now be responsible for appointing auditors, approving the compensations and overseeing the audit work. This effectively mitigates the economic bonding between auditors and clients. Also, clients with stronger bargaining power may instead experience a decrease in audit quality, as lower audit fees may mean less effort from auditors. This study divides abnormal audit fees into positive and negative to measure economic bonding and bargaining power, respectively. Examining firms listed in NYSE and NASDAQ from 2005-2011, the results reveal that audit quality, using absolute discretionary accruals as proxy, has no association with positive abnormal audit fees. This is in contrast with the expectation that higher audit fees should result in better audit quality. On the other hand, higher negative abnormal audit fees leads to lower audit quality, which is consistent with expectations. Also, this paper partitions the sample data into Big N and non-Big N subsamples, with Big N auditors less likely to reduce audit quality if lower audit fees are received.