Can Audit Fees Inhibit Accounting Misstatements? Moderating Effects of Auditor Reputation from Chinese Experience
We examine the association between audit fees and accounting misstatements, and test the moderating effect of auditor reputation on this association in China, where auditors' legal liability is essentially weak. We find that current-year audit fees are negatively and significantly associated with the likelihood of current-year financial statement being misstated. This result is consistent with prior work, indicating a negative relation between audit fees and future misstatements in a strong litigation environment such as in the United States. This finding indicates that higher audit fees can reflect audit effort, even in a setting where litigation plays essentially no role. Prior literature suggests that audit firms have reputational incentives; thus, we use auditor irregularities and audit firm rank as proxies for auditor reputation and find that the negative relationship between misstatements and audit fees weaken as auditor reputation decreases. Our results indicate that auditor reputation can negatively moderate the relationship between audit fees and misstatements and is more important in the absence of litigation
Year of publication: |
2015
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Authors: | Li, Bin |
Other Persons: | Ma, Chen (contributor) |
Publisher: |
[2015]: [S.l.] : SSRN |
Subject: | Wirtschaftsprüfung | Financial audit | China | Reputation | Honorar | Fee (Remuneration) | Dienstleistungsqualität | Service quality |
Saved in:
freely available
Extent: | 1 Online-Ressource (24 p) |
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Type of publication: | Book / Working Paper |
Language: | English |
Notes: | Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments January 27, 2015 erstellt |
Other identifiers: | 10.2139/ssrn.2556671 [DOI] |
Source: | ECONIS - Online Catalogue of the ZBW |
Persistent link: https://www.econbiz.de/10013029364
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