Corporate governance quality, audit fees and non-audit services fees

Zaman, Mahbub, Hudaib, Mohammed, & Haniffa, Roszaini (2011) Corporate governance quality, audit fees and non-audit services fees. Journal of Business Finance & Accounting, 38(1/2), pp. 165-197.

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Abstract

This paper extends prior research on the relationship between governance quality and auditor remuneration.We examine the influence of audit committee effectiveness (ACE), a proxy for governance quality, on audit fees (AF) and non-audit services fees (NASF) using a new composite measure comprising audit committee independence, expertise, diligence and size. We find that after controlling for board of director characteristics, there is a significant positive association between ACE and AF only for larger clients. Our results indicate that effective audit committees undertake more monitoring which results in wider audit scope and higher audit fees. Contrary to our expectations, we find the association between ACE and NASF to be positive and significant, especially for larger clients. This suggests that larger clients are more likely to purchase non-audit services (NAS) even in the presence of effective audit committees probably due to the complexity of their activities. Overall, our findings support regulatory initiatives aimed at improving corporate governance quality.

Impact and interest:

29 citations in Scopus
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18 citations in Web of Science®

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ID Code: 79420
Item Type: Journal Article
Refereed: Yes
Keywords: audit committees, corporate governance, non-executive directors, audit fees, non-audit fees, audit quality
DOI: 10.1111/j.1468-5957.2010.02224.x
ISSN: 1468-5957
Subjects: Australian and New Zealand Standard Research Classification > COMMERCE MANAGEMENT TOURISM AND SERVICES (150000) > ACCOUNTING AUDITING AND ACCOUNTABILITY (150100)
Divisions: Current > QUT Faculties and Divisions > QUT Business School
Current > Schools > School of Chemistry, Physics & Mechanical Engineering
Copyright Owner: © 2011 Blackwell Publishing Ltd
Deposited On: 12 Dec 2014 01:01
Last Modified: 06 Jan 2015 00:09

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