Open Access
Subscription Access
Open Access
Subscription Access
Audit Committee Effectiveness:Relationship between Audit Committee Characteristics and Audit Fees and Non-Audit Service Fees
Subscribe/Renew Journal
Audit committee responsibilities have increased significantly in recent years due to uncertainties arising from a changing statutory, regulatory, legal and risk environment for companies. Over the past two decades their role has evolved into an independent oversight responsibility for the audit processes and the financial reporting process. The results highlight that the audit committee size and the presence of independent directors on the audit committee board have a higher demand for oversight and thus a higher requirement for audit effort resulting in higher audit fees. The results indicate that higher audit fees entail increased audit testing and higher audit quality. Audit committee expertise is related to lower audit fees indicating that high-quality audit committees are in a position to effectively oversee the financial reporting process themselves and require less audit efforts from the external auditor.
Keywords
Audit Committee, Audit Fees, Non-Audit Service Fees, Corporate Governance.
Subscription
Login to verify subscription
User
Font Size
Information
- Abbott, L. J., Parker, S., Peters, G. F., & Raghunandan, K. (2003a). An empirical investigation of audit fees, non-audit fees, and audit committees. Contemporary Accounting Research, 20(2), 215-234.
- Abbott, L. J., Parker, S., Peters, G. F., & Raghunandan, K. (2003b). The association between audit committee characteristics and audit fees. Auditing: A Journal of Practice and Theory, 22(2), 17-32.
- -Sa’eed S. M., & Al-Mahamid M. A. (2011). Features of an effective audit committee, its role in strengthening the financial reporting: Evidence from Amman Stock Exchange. Retrieved from http://www.academia.edu/753142 (accessed on Aug. 12, 2013).
- Anderson, R. C., Mansi, S. A., & Reeb, D. (2004). Board characteristics, accounting report integrity, and the cost of debt. Journal of Accounting and Economics, 37(3), 15-42.
- Antle, R., Griffin, P. A., Teece, D. J., & Williamson, O. E. (1997). An Economic Analysis of Auditor Independence for a Multi-Client, Multi-Service Public Accounting Firm. Berkeley, CA: The Law & Economics Consulting Group Inc.http://www.research-gate.net/publication/228299523.
- Ashbaugh, H., LaFond, R., & Mayhew, B. (2003) Do non-audit services compromise auditor independence? Further e vidence. Account Review, 78(3), 611-640
- Beasley, M. S., & Salterio, S. E. (2001). The relationship between board characteristics and voluntary improvements in audit committee composition and experience. Contemporary Accounting Research, 18(3), 539-570
- Beattie, V., & Fearnley, S. (2002), Auditor independence and non-audit services: A literature review. Retrieved from https://www.icaew.com/~/media/corporate/files/technical/research%20and%20academics/publications%20and20projects/audit%20and%20assurance%20publications/auditor%20independence%20and%20non%20audit%20services.ashx (accessed on Aug. 12, 2014).
- Bedard, J. C., & Johnstone, K. M. (2004). Earnings manipulation risk, corporate governance risk, and auditors’ planning and pricing decisions. The Accounting Review, 79(2), 277-304.
- Blue Ribbon Committee (1999). Report and Recommendations of the Blue Ribbon Committee on Improving the Effectiveness of Corporate Audit Committees. Stanford, CT: BRC. Retrieved from http://www.nfcgindia.org/library_int.htm (accessed on Aug 12, 2014).
- Carcello, J. V., Hermanson, D. R., Neal, T. L., & Riley Jr. R. A. (2002b). Board characteristics and audit fees. Contemporary Accounting Research, 19(3), 365-384.
- Cohen, J. (1988). Audit committees in major UK companies. Managerial Auditing Journal, 8(3), 25-31.
- Cohen, J., & Hanno, D. (2000). Auditors’ consideration of corporate governance and management control philosophy in preplanning and planning judgments. Auditing: A Journal of Practice and Theory, 19, 133-146.
- Collier, P., & Gregory, A. (1996). Audit committee effectiveness and the audit fee. European Accounting Review, 5(2), 177-198.
- DeZoort, F. T., Hermanson, D. R., & Houston, R. W. (2003). Audit committee member support for proposed audit adjustments: A source credibility perspective. Auditing: A Journal of Practice and Theory, 22(2), 189-205.
- DeZoort, F. T., Hermanson, D. R., Archambeault, D. S., & Reed, S. A. (2002). Audit committee effectiveness: A synthesis of the empirical audit committee literature. Journal of Accounting Literature, 21(2), 38-75.
- Francis, J. (1984). The effect of audit firm size on prices. Journal of Accounting and Economics, 6(2), 133-151.
- Goddard, A., & Masters, C. (2000). Audit committee, Cadbury code and audit fees: An empirical analysis of UK companies. Managerial Auditing Journal, 15(7), 355-371.
- Hodge, F. (2003). Investors perceptions of earnings quality, auditor independence, and the usefulness of audited financial information. Accounting Horizons, 17(2), 37-48.
- Kalbers, L. P., & Fogarty, T. J. (1993). Audit committee effectiveness: An empirical investigation of the contribution of power. Auditing: A Journal of Practice and Theory, 12(1), 24-49.
- Krishnan, G. V., & Visvanathan, G. (2008). Does the SOX definition of an accounting expert matter? The association between audit committee directors accounting expertise and accounting conservatism. Retrieved from http://papers.ssrn.com/sol3/papers.cfm? abstract_id =1029752 (accessed on Nov. 12, 2014).
- Krishnan, G. V., & Visvanathan, G. (2009). Do auditors price audit committee’s expertise? The case of accounting vs. non-accounting financial experts. Journal of Accounting, Auditing and Finance, 24(1), 115-144.
- Lee, T., & Stone, M. (1997). Economic agency and audit committee: Responsibilities and membership composition. International Journal of Auditing, 1(3), 97-16.
- Menon, K., & Williams, J. (1994). The use of audit committees for monitoring. Journal of Accounting and Public Policy, 13(2), 121-139.
- Mohiuddin, M., & Karbhari, Y. (2010). Audit committee effectiveness: A critical literature review. Journal of Business and Economics, 9(3), 97-125.
- Mundalk, Y. (1978). On the pooling of time series and cross section data. Econometrica, 46(1), 69-85.
- Nobel, P. (1998). Corporate governance: der brockenschlag vom aktionariat zum management. INDEX, 3(8).
- Palmrose, Z. V. (1986). Audit fees and auditor size: Further evidence. Journal of Accounting Research, 24(1), 97-110.
- Porter, B. A., & Gendall, P. J. (1998). Audit committees in private and public sector corporate in New Zealand: An empirical investigation. International Journal of Auditing, 2(3), 35-48.
- Raghunandan, K., Rama, D. V., & Read, W. J. (2001). Audit committee composition, gray directors, and interaction with internal auditing. Accounting Horizons, 15(2), 105-18.
- Rezaee, Z. (1997). Corporate governance and accountability: The role of audit committees. Internal Auditing, 13(1), 27-41.
- Sharma, V. D., Naiker, V., & Lee, B. (2009). Determinants of audit committee meeting frequency: Evidence from a voluntary governance system. International Journal of Business, 23(3), 245-263.
- Spira, L. F. (1999). Ceremonies of governance: Perspectives on the role of the audit committee. Journal of Management and Governance, 3(1), 231-260.
- Spira, L. F. (2002). Audit committee performing corporate governance. Boston: Kluwer Academic Publishers.
- Stewart, G. J., & Kent, P. (2006). The relation between external audit fees, audit committee characteristics and internal audit. Accounting and Finance, 46(3), 387-404.
- Stewart, J., & Munro, L. (2007). The impact of audit committee existence and audit committee meeting frequency on the external audit: Perceptions of Australian auditors. International Journal of Auditing, 11(1), 51-69.
- Turley, S., & Zaman, M. (2004). The corporate governance effects of audit committees. Journal of Management and Governance, 8(3), 305-332.
- Vanasco, R. (1994). The audit committee: an international perspective. Managerial Auditing Journal, 9(8), 18-42.
- Vicknair, D., Hickman, K., & Carnes, K. C. (1993). A note on audit committee independence. Accounting Horizon, 7(1), 53-57.
- Young, L. H., & Mande, V. (2005). The relationship audit committee characteristic with endogenously determined audit and non-audit Fees. Quarterly Journal of Business and Economics. 44(3/4), 94 -112.
- Zain, M. M., & Subramaniam, N. (2007). Internal auditor perceptions on audit committee interactions. Corporate Governance: An International Review, 15(5), 894-908.
- Zaman, M., Hudaib, M., & Haniffa, R. (2011). Corporate governance quality, audit fees and no-audit services fees. Journal of Business Finance and Accounting, 38(1/2), 165-197.
Abstract Views: 330
PDF Views: 0