Fee Pressure and Audit Quality
48 Pages Posted: 2 Aug 2011 Last revised: 1 May 2014
Date Written: April 16, 2014
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: Suggested Citation