Corporate Compensation Policies and Audit Fees

Abstract

Recent accounting research has started to investigate the links between corporate compensation and auditor compensation. Engel, Hayes and Wang (2010) take a first step to connect these previously-distinct literatures by investigating the association between audit committee pay and audit fees. I discuss the findings of this study and then present complementary empirical evidence on the association between CEO compensation and audit fees. My descriptive empirical evidence suggests economically large co-variation in CEO compensation and audit fees. I conclude with suggestions for future research on the links between firms’ corporate compensation and auditor compensation policies.

Keywords: Audit Fees, CEO Compensation, Complexity, Entrenchment, Risk

JEL Classification: M41, M42, M52