Audit Fees and Book-Tax Differences

47 Pages Posted: 17 Sep 2009

See all articles by Michelle Hanlon

Michelle Hanlon

Massachusetts Institute of Technology (MIT) - Sloan School of Management

Gopal V. Krishnan

Bentley University

Lillian F. Mills

University of Texas at Austin - McCombs School of Business

Multiple version iconThere are 2 versions of this paper

Date Written: September 16, 2009

Abstract

This paper examines whether book-tax differences help explain audit fees. By attesting to the fair representation of financial information, auditors are an important intermediary in financial statement users’ trust and understanding of financial information. Our evidence that large book-tax differences are associated with higher audit fees implies that such book-tax differences represent an observable proxy for earnings quality that affects auditor decisions. Our paper contributes to existing capital market research that examines audit fees and the research that examines market participants’ use of the information in book-tax differences.

Keywords: Audit fees, book-tax differences, earnings quality

JEL Classification: M41

Suggested Citation

Hanlon, Michelle and Krishnan, Gopal and Mills, Lillian F., Audit Fees and Book-Tax Differences (September 16, 2009). Available at SSRN: https://ssrn.com/abstract=1474529 or http://dx.doi.org/10.2139/ssrn.1474529

Michelle Hanlon

Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )

100 Main Street
E62-668
Cambridge, MA 02142
United States
617-253-9849 (Phone)

Gopal Krishnan

Bentley University ( email )

175 Forest Street
Waltham, MA 02452
United States
781-891-2477 (Phone)

Lillian F. Mills (Contact Author)

University of Texas at Austin - McCombs School of Business ( email )

Austin, TX 78712
United States

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