Auditor’s Gender and Audit Fees
33 Pages Posted: 30 Oct 2010
Date Written: May 19, 2010
Abstract
Documented behavioral differences between women and men suggest (see e.g. Davidson & Gist, 1996; Fondas & Sassalos, 2000; Schubert, 2006; Bonner, 2008) that the gender of the audit engagement partner may have implications for the price setting of the audit. Thus, this paper examines the effect of the auditor’s gender on audit fees in an environment, where the responsible audit partners can be identified. Using a sample of public firms from the NASDAQ OMX exchanges in three Nordic countries, we find evidence indicating that firms with female audit engagement partners have significantly higher audit fees. Our findings are consistent with the interpretation that gender differences in risk tolerance may affect the pricing decisions by increasing the audit investment and/or increasing in the audit fee risk premium. Alternatively, female auditors’ diligence, lower overconfidence, and higher level of preparation could also lead to an increase in audit investment, and thereby result in higher audit fees.
Keywords: audit fees, gender-based differences, psychological characteristics
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