scholarly journals Fair Value Information, Audit fees and Audit Committee in Taiwan

2017 ◽  
Vol 8 (2) ◽  
pp. 124
Author(s):  
Shu-Hsing Wu ◽  
Tsung-Che Wu ◽  
Kun-Lin Yang
Keyword(s):  
Audit Committee ◽  
Cost Model ◽  
Audit Fees ◽  
Fair Value ◽  
Regulatory Requirements ◽  
Audit Risk ◽  
Level 3 ◽  
Voluntary Choice ◽  
Value Model

Regulatory requirements to adopt IFRS and to disclose audit fees make it possible to examine association between audit fees and proportion of fair-valued assets among firms in Taiwan. A voluntary choice of adding audit committee in the firm for monitoring purpose also helps to examine the association further. Empirical results indicate that lower audit fees is related to higher proportion of (Level 2) fair-valued assets, a finding consistent to Goncharov et al.’s (2014) suggestion that firms pay lower audit fees with fair-value model than with cost model. Insignificant association is found for proportion of Level 3 fair-valued assets, which is similar to Glover et al.’s (2014) suggestion that firm’s reluctant attitude in adopting Level 3 assets. Last of all, when audit committee is added, firm’s audit fees is negatively associated with Level 1 and 2 fair-valued assets, implying audit committee’s role of monitoring and further reducing audit risk and audit fees among Taiwanese firms.

CEO and CFO Equity Incentives and the Pricing of Audit Services

2013 ◽  
Vol 33 (2) ◽  
pp. 1-25 ◽  
Author(s):  
B. Anthony Billings ◽  
Xinghua Gao ◽  
Yonghong Jia
Keyword(s):  
Positive Association ◽  
Audit Fees ◽  
Internal Controls ◽  
Audit Risk ◽  
Pricing Decisions ◽  
Equity Incentives ◽  
Accounting Scandals ◽  
Using Data ◽  
Distinctive Role

SUMMARY: The alleged perverse role of managerial incentives in accounting scandals, and the distinctive role of auditors in identifying and intervening in attempted earnings manipulation, highlight the importance of explicitly considering executive incentive plans by auditors in the auditing process. By empirically testing auditors' responses to CEO/CFO equity incentives in planning and pricing decisions using data from 2002 through 2009, we document compelling evidence that CFO equity incentives are positively associated with audit fees and CEO equity incentives are not statistically related to audit fees, suggesting that auditors perceive heightened audit risk associated with CFO equity incentives. Our further analyses reveal that the positive association between CFO equity incentives and audit fees is more pronounced in firms with weak internal controls, indicating heightened risk associated with CFO equity incentives in this setting perceived by auditors. JEL Classifications: G30, G34, M42, M52.

The Role of Auditee Profitability in Pricing New Audit Engagements

2000 ◽  
Vol 19 (1) ◽  
pp. 157-167 ◽  
Author(s):  
Paul L. Walker ◽  
Jeffrey R. Casterella
Keyword(s):  
Audit Fees ◽  
Audit Risk ◽  
Cpa Firms

This paper examines the role of auditee profitability in pricing new audit engagements. Changes in the auditing environment are noted that suggest that auditors are managing their practices differently than they did in prior years. Audit fees are examined to answer two questions: (1) whether CPA firms still discount fees for new engagements in the current audit environment; (2) whether such fee discounts are dependent upon auditee profitability. The results suggest that auditors still discount new engagements in the 1990s, but that they are less willing to offer discounts when auditees show losses in the year prior to the new audit engagement. Further, this result is stronger for companies that switch from non-Big 6 firms to Big 6 firms than it is for intra-Big 6 switches. These findings suggest that auditors are managing their exposure to audit risk by adjusting audit fees.

Fair Value Measurements and Audit Fees: Evidence from the Banking Industry

2014 ◽  
Vol 33 (3) ◽  
pp. 33-58 ◽  
Author(s):  
Michael L. Ettredge ◽  
Yang Xu ◽  
Han S. Yi
Keyword(s):  
Positive Association ◽  
Audit Fees ◽  
Fair Value ◽  
Data Availability ◽  
Publicly Traded ◽  
Cost Efficiencies ◽  
Level 3 ◽  
Level 1 ◽  
Fair Value Measurements ◽  
Level 2

SUMMARY: Using publicly traded bank holding company data from 2008 through 2011, this paper documents that the proportions of fair-valued assets held by banks are positively associated with audit fees. The positive association between audit fees and the proportions of total assets that are fair-valued using Level 3 inputs is greater than its positive association with the proportions of total assets that are fair-valued using Level 1 or Level 2 inputs. These results are consistent with a hypothesized scenario in which audit effort increases in the difficulty of verifying asset fair values. We also document that bank specialist auditors, defined as in Behn, Choi, and Kang (2008), charge lower audit fees to bank clients on average, suggesting cost efficiencies passed to clients as lower fees. However, bank expert auditors charge more for auditing the proportions of total assets that are fair-valued. Overall, the results support concerns expressed by some observers that greater use of fair value measurements for financial instruments will trigger increased audit fees. Data Availability: All data used in this study are publicly available from the sources identified in the text.

scholarly journals Family control, audit committees and audit fees

2010 ◽  
Vol 7 (3) ◽  
pp. 73-85 ◽  
Author(s):  
Sidney Leung ◽  
Ran Wang
Keyword(s):  
Hong Kong ◽  
Audit Committee ◽  
Positive Association ◽  
Audit Fees ◽  
Audit Committees ◽  
Fiscal Year ◽  
Audit Risk ◽  
Family Control ◽  
The Impact

This paper examines the impact of family control on audit effort and audit risk as proxied by audit fees, the relation between the quality of the audit committee (AC) and audit fees, and how family control influences the association between AC quality and audit fees. Using a sample of Hong Kong companies from the 2005/06 fiscal year, we find that family-controlled firms have lower audit fees. The results also show a positive association between AC quality and audit fees in Hong Kong. Moreover, the association of higher AC quality with higher audit fees is stronger in family-controlled firms than in non-family-controlled firms. Collectively, our findings suggest that audit committees in family-controlled firms require a higher degree of external audit effort than do those in non-familycontrolled firms.

The impact of audit committee effectiveness on audit fees and non-audit service fees

2018 ◽  
Vol 31 (2) ◽  
pp. 174-191 ◽  
Author(s):  
Muhammad Jahangir Ali ◽  
Rajbans Kaur Shingara Singh ◽  
Mahmoud Al-Akra
Keyword(s):  
Audit Committee ◽  
Audit Quality ◽  
Audit Fees ◽  
Audit Committees ◽  
Regulatory Requirements ◽  
Content Type ◽  
Financial Expertise ◽  
The Difference ◽  
Accounting Expertise ◽  
The Impact

Purpose The purpose of this study is to examine the impact of audit committee effectiveness on audit fees and non-audit service (NAS) fees in a less regulatory environment. Design/methodology/approach The authors construct a composite audit committee effectiveness measure incorporating audit committee independence, diligence, size, financial expertise and the chairperson’s accounting expertise. Findings The authors find that audit committee effectiveness has a positive significant impact on both audit fees and NAS fees. This suggests that effective audit committees can hold auditors accountable resulting in better audit quality and consequently higher audit fees. Originality/value The link between more effective audit committees with higher NAS purchases can be explained in light of the difference in regulatory requirements providing audit committees with decision rights on the use of NASs, therefore approving more NAS and increasing NASF. Additional tests and robustness analyses confirm the results.

scholarly journals Fair value measurement and its impact on audit fees: evidence in the Brazilian market

2021 ◽  
Vol 13 (2) ◽  
Author(s):  
Edson Vinícius Pontes Bastos ◽  
Luciana Holtz ◽  
Odilanei Morais dos Santos
Keyword(s):  
Risk Premium ◽  
Audit Fees ◽  
Fair Value ◽  
Audit Risk ◽  
Audit Firms ◽  
Fair Value Measurement ◽  
Before And After ◽  
Multiple Regression Technique ◽  
Value Measurement ◽  
The Impact

Objective: The purpose is to verify the impact of using the measurement at fair value on the audit fees, differentiating even the period before and after the adoption of IFRS 13 (CPC 46).  Methodology: The research is quantitative, for testing the hypothesis raised, the multiple regression technique was used, with data available from companies listed in B3 for the period between 2010 and 2016.  Results: The evidence indicates that the complexity and subjectivity of fair value is recognized by the audit firms, that is, audit firms recognize that fair value measurement implies more effort and that the associated audit risk rises, leading firms to charge of a risk premium for the provision of the service. However, it was not possible to confirm that auditors' fees increased after the adoption of IFRS13 (CPC 46).  Contributions of study: Theoretical/methodological - The study contributes to understanding the impacts of adopting international accounting standards, in this specific case on audit fees. Social/management - Given the evidence that there is a higher audit cost associated with the greater complexity of information in a fair value environment, companies can develop mechanisms to minimize the uncertainty of the information to be audited.

The consequences of audit committee quality

2018 ◽  
Vol 33 (2) ◽  
pp. 192-216 ◽  
Author(s):  
Yu-Chun Lin
Keyword(s):  
Audit Committee ◽  
Estimation Procedure ◽  
Audit Fees ◽  
Economic Incentives ◽  
Audit Committees ◽  
Content Type ◽  
Big 4 ◽  
Auditor Switches ◽  
Stage Estimation

Purpose This study aims to examine the consequences when audit committees have different economic incentives (i.e. incentive-based compensation) to switch auditors. Design/methodology/approach The author focuses on companies experiencing an auditor switching event (client-initiated dismissals) and uses Heckman’s (1997) two-stage estimation procedure to control endogenous bias. Audit committee quality is measured by the level of incentive-based compensation. Accrual quality and abnormal audit fees are examined over the periods of auditor switches. Findings Using 1,087 US companies between 2006 and 2014, the author found that audit committees’ incentive-based compensation is negatively (positively) associated with accruals quality (abnormal audit fees) only when companies switch from Big 4 to non-Big 4 auditors or switch within non-Big 4 auditors. For companies that switch from non-Big 4 to Big 4 auditors, she found no evidence. Research limitations/implications This study provides a detailed discussion of the consequences of audit committee quality. The findings also contribute to the literature by concluding that economic incentives are associated with ineffective oversight, particularly after auditor switches. Practical implications Sarbanes–Oxley Act and its associated regulations significantly expanded the oversight role of audit committees. However, regulators bypassed restrictions on audit committee compensation. Accordingly, the author suggests that regulators focus on the issue of economic incentives to improve audit committee quality. Originality/value Minimal research has been conducted on the role of audit committees when companies switch to a new external auditor. The author shows that when companies switch auditors, incentive-based compensation significantly affects the monitoring quality of audit committees.

scholarly journals Comparability of Accounting Choices in Future Valuation of Investment Properties: An Analysis of Brazilian and Portuguese Listed Companies

2015 ◽  
Vol 26 (68) ◽  
pp. 154-166 ◽  
Author(s):  
Flaida Êmine Alves de Souza ◽  
Reiner Alves Botinha ◽  
Pablo Rogers Silva ◽  
Sirlei Lemes
Keyword(s):  
Financial Reporting ◽  
Cost Model ◽  
Fair Value ◽  
Listed Companies ◽  
Financial Reporting Standards ◽  
Accounting Choices ◽  
Explanatory Factors ◽  
Model Versus ◽  
The Cost ◽  
Value Model

<p>One of the main purposes for adopting the International Financial Reporting Standards (IFRS) is the quest for comparability between financial statements within the same country, over time, and between different countries. IFRS have the feature of allowing accounting choices in most of their standards. However, the existence of such flexibility in the process for recognizing, measuring, and disclosing as sets and liabilities may impact on comparability. IFRS have been criticized both due to their accounting choices and the adoption of the fair value paradigm. This article examines these two issues, investigating the choice of the cost model versus the choice of the fair value model for investment properties (IPs), an option guaranteed under the terms of the International Accounting Standard (IAS) 40. This research aimed to identify the comparability degree and the factors that determine the accounting choices made by managers of IPs, in Brazilian and Portuguese listed companies, within the periods from 2010 to 2012. Comparability, within and between countries, was identified by the T-index and the search for the determining factors of accounting choices made by managers was performed by means of a logistic re gression analysis. As a result, it was found that, despite the accounting choices allowed by IAS 40, there was a mean comparability between the accounting practices of firms in these countries, but showing a decrease in the index over the years. The explanatory factors identified were auditing by one of the big four (PricewaterhouseCoopers, Deloitte Touche Tohmatsu, KPMG, or Ernst & Young), companies' indeb tedness, relative importance of IPs' balance, net profit, and less experience of Brazil in using the fair value method to appraise IPs.</p>

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