Fee Pressure and Audit Quality

48 Pages Posted: 2 Aug 2011 Last revised: 1 May 2014

See all articles by Michael Ettredge

Michael Ettredge

University of Kansas - Accounting and Information Systems Area

Elizabeth Emeigh Fuerherm

University of Kansas

Chan Li

University of Kansas

Date Written: April 16, 2014

Abstract

This study investigates the association of audit fee pressure with an inverse measure of audit quality, misstatements in audited data, during the recent recession. Fee pressure in a year is measured as the difference between benchmark “normal” audit fees and actual audit fees. We find fee pressure is positively and significantly associated with accounting misstatements in 2008, the center of the recession. Our results suggest that auditors made fee concessions to some clients in 2008, and that fee pressure was associated with reduced audit quality in that year.

Keywords: audit fee, audit quality, fee pressure, recession, misstatement, PCAOB

JEL Classification: M40, M42

Suggested Citation

Ettredge, Michael L. and Fuerherm, Elizabeth Emeigh and Li, Chan, Fee Pressure and Audit Quality (April 16, 2014). Accounting, Organizations and Society, Forthcoming. Available at SSRN: https://ssrn.com/abstract=1903860 or http://dx.doi.org/10.2139/ssrn.1903860

Michael L. Ettredge (Contact Author)

University of Kansas - Accounting and Information Systems Area ( email )

1300 Sunnyside Avenue
Lawrence, KS 66045
United States
785-864-7537 (Phone)
785-864-5328 (Fax)

Elizabeth Emeigh Fuerherm

University of Kansas ( email )

1415
Lawrence, KS 66045
United States

Chan Li

University of Kansas ( email )

Capitol Federal Hall
Lawrence, KS 66045
United States
7857661277 (Phone)
66045 (Fax)

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