Fair value accounting for non-current assets and audit fees: Evidence from Australian companies

Yao, Dai Fei, Percy, Majella, & Hu, Fang (2015) Fair value accounting for non-current assets and audit fees: Evidence from Australian companies. Journal of Contemporary Accounting and Economics, 11(1), pp. 31-45.

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Abstract

We investigate the association between asset revaluations of non-current assets and audit fees, using a sample of ASX 300 companies from the years 2003–2007.We report that there is a significant increase in the audit fees paid when non-financial assets (PPEs, investment properties and intangible assets) are measured at fair values. Moreover, we provide evidence that an independent valuer or appraiser significantly weakens the positive association between asset revaluations and audit fees. Furthermore, companies whose noncurrent assets are revalued upwards and those that revalue their non-current assets upwards every year have significantly higher audit fees. Additional tests provide empirical evidence that the strength of corporate governance has a moderating effect on the level of audit fees. This study contributes to the ongoing debate on the role of fair value accounting. The findings suggest agency costs associated with fair value estimates may offset the benefits from the use of fair value accounting.

Impact and interest:

3 citations in Scopus
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ID Code: 91951
Item Type: Journal Article
Refereed: Yes
Keywords: asset revlauations, audit fees, corporate governance
DOI: 10.1016/j.jcae.2014.12.003
ISSN: 1815-5669
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 Accountancy
Copyright Owner: Copyright 2014 Elsevier Ltd.
Deposited On: 18 Jan 2016 00:19
Last Modified: 18 Jan 2016 22:43

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