Corporate Governance Quality, Audit Fees and Non-Audit Services Fees

33 Pages Posted: 16 Mar 2011

See all articles by Mahbub Zaman

Mahbub Zaman

Hull University Business School

Mohammed Hudaib

affiliation not provided to SSRN

Roszaini Haniffa

University of Bradford - School of Management

Date Written: March 14, 2011

Abstract

This paper extends prior research on the relationship between governance quality and auditor remuneration. We examine the influence of audit committee effectiveness (ACE), a proxy for governance quality, on audit fees (AF) and non-audit services fees (NASF) using a new composite measure comprising audit committee independence, expertise, diligence and size. We find that after controlling for board of director characteristics, there is a significant positive association between ACE and AF only for larger clients. Our results indicate that effective audit committees undertake more monitoring which results in wider audit scope and higher audit fees. Contrary to our expectations, we find the association between ACE and NASF to be positive and significant, especially for larger clients. This suggests that larger clients are more likely to purchase non-audit services (NAS) even in the presence of effective audit committees probably due to the complexity of their activities. Overall, our findings support regulatory initiatives aimed at improving corporate governance quality.

Keywords: audit committees, corporate governance, non-executive directors, audit fees, non-audit services, audit quality

Suggested Citation

Zaman, Mahbub and Hudaib, Mohammed and Haniffa, Roszaini M, Corporate Governance Quality, Audit Fees and Non-Audit Services Fees (March 14, 2011). Journal of Business Finance & Accounting, Vol. 38, Issue 1-2, pp. 165-197, 2011. Available at SSRN: https://ssrn.com/abstract=1786244 or http://dx.doi.org/10.1111/j.1468-5957.2010.02224.x

Mahbub Zaman (Contact Author)

Hull University Business School ( email )

Hull, HU6 7RX
United Kingdom

HOME PAGE: http://www.mahbubzaman.com

Mohammed Hudaib

affiliation not provided to SSRN

No Address Available

Roszaini M Haniffa

University of Bradford - School of Management ( email )

Emm Lane
Bradford, West Yorkshire Bd9 4JL
United Kingdom

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