Abstract

http://ssrn.com/abstract=231582
 
 

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Board Characteristics and Audit Fees


Joseph V. Carcello


University of Tennessee, Knoxville - College of Business Administration

Dana R. Hermanson


Kennesaw State University - Department of Accounting

Terry L. Neal


University of Tennessee

Richard A. Riley Jr.


West Virginia University - Department of Accounting and Management Information Systems

April 2000


Abstract:     
This paper examines the relationship between board characteristics and external audit fees for Fortune 1000 companies. Competing arguments exist regarding the possible relationship between board characteristics and fees.

One view is that a more independent, diligent, and expert board would be more concerned with effectively discharging its monitoring role and would be more supportive of the external audit function. Such a board would be likely to insist on enhanced audit scope, thus increasing the audit fee. An alternative view is that a more independent, diligent, and expert board would reduce the auditor's assessment of control risk and would substitute some of its own monitoring for the monitoring of the auditor. This would reduce audit effort, thus decreasing the audit fee.

Consistent with the first view, we find significant positive relationships between board independence, diligence, and expertise and audit fees. A more independent, diligent, and expert board does not appear to substitute for audit effort; rather, such a board may complement auditor oversight.

These results add to the growing body of literature documenting a relationship between corporate governance mechanisms and various facets of the financial reporting and audit processes. In addition, the results add to our understanding of the determinants of audit fees.

Number of Pages in PDF File: 38

JEL Classification: M41, M49, G32, G34

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Date posted: October 12, 2000  

Suggested Citation

Carcello, Joseph V. and Hermanson, Dana R. and Neal, Terry L. and Riley, Richard A., Board Characteristics and Audit Fees (April 2000). Available at SSRN: http://ssrn.com/abstract=231582 or http://dx.doi.org/10.2139/ssrn.231582

Contact Information

Joseph V. Carcello (Contact Author)
University of Tennessee, Knoxville - College of Business Administration ( email )
Department of Accounting & Business Law
601 Stokely Management Center
Knoxville, TN 37996-0560
United States
865-974-1757 (Phone)
865-974-4631 (Fax)
Dana R. Hermanson
Kennesaw State University - Department of Accounting ( email )
1000 Chastain Road
Kennesaw, GA 30144
United States
770-423-6077 (Phone)
770-499-3420 (Fax)
Terry L. Neal
University of Tennessee ( email )
639 Stokely Management Center
Knoxville, TN 37996-0560
United States
865-974-2664 (Phone)
865-974-4631 (Fax)
Richard A. Riley Jr.
West Virginia University - Department of Accounting and Management Information Systems ( email )
Morgantown, WV 26506
United States
304-293-7849 (Phone)
304-293-0635 (Fax)
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References:  46
Citations:  78
Footnotes:  17

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