TY - JOUR
T1 - The impact of board reforms on audit fees
T2 - International evidence
AU - Kim, Incheol
AU - Kong, Joon Ho
AU - Yang, Rong
N1 - Publisher Copyright:
© 2023 John Wiley & Sons Ltd.
PY - 2024/1/1
Y1 - 2024/1/1
N2 - In this study, we investigate whether and to what extent country-level board reforms affect audit pricing decisions. We find audit fees are positively associated with board reforms. An increase in audit fees is more pronounced for firms that switched up to Big N auditors following board reforms. After board reforms, firms are less likely to issue restatements, and both analyst forecast accuracy and management forecast frequency increase, indicating improved audit quality and information transparency in the postreform period. Moreover, the positive relation between board reforms and audit fees is more evident for firms in countries that lack institutional governance mechanisms, captured by emerging capital markets, high political risk, weak governmental enforcement actions and low corporate governance quality. Overall, our findings broadly support the view that audit fees increase upon demand for better audit quality.
AB - In this study, we investigate whether and to what extent country-level board reforms affect audit pricing decisions. We find audit fees are positively associated with board reforms. An increase in audit fees is more pronounced for firms that switched up to Big N auditors following board reforms. After board reforms, firms are less likely to issue restatements, and both analyst forecast accuracy and management forecast frequency increase, indicating improved audit quality and information transparency in the postreform period. Moreover, the positive relation between board reforms and audit fees is more evident for firms in countries that lack institutional governance mechanisms, captured by emerging capital markets, high political risk, weak governmental enforcement actions and low corporate governance quality. Overall, our findings broadly support the view that audit fees increase upon demand for better audit quality.
KW - Analyst Forecast
KW - Audit Committee
KW - Audit Fee
KW - Audit Quality
KW - Big N Auditors
KW - Board Independence
KW - Board Reform
KW - Corporate Governance
KW - International Accounting
KW - Restatement
UR - http://www.scopus.com/inward/record.url?scp=85146329003&partnerID=8YFLogxK
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U2 - 10.1111/jbfa.12685
DO - 10.1111/jbfa.12685
M3 - Article
AN - SCOPUS:85146329003
SN - 0306-686X
VL - 51
SP - 45
EP - 83
JO - Journal of Business Finance and Accounting
JF - Journal of Business Finance and Accounting
IS - 1-2
ER -