Audit Fees Post-SOX: An Auction Model

23 Pages Posted: 5 Jul 2015 Last revised: 23 Jul 2015

See all articles by Ramy Elitzur

Ramy Elitzur

University of Toronto - Rotman School of Management

Arieh Gavious

Ben-Gurion University of the Negev

Yizhaq Minchuk

Shamoon College of Engineering

Multiple version iconThere are 2 versions of this paper

Date Written: June 2015

Abstract

The literature shows that audit fees have increased after the SOX ban to audit clients on non-audit services (NAS) but the reason behind it has been unclear until now. Using an auction modeling approach, this study aims to bridge this gap by providing a theoretical explanation for this enigma. In the first auction setting, auditors can compete for both auditing and NAS (the pre-SOX setting). We then investigate how the auction would look when auditors can compete on either auditing or NAS (the post-SOX setting). We show that audit fees will be higher in the post-SOX setting than the pre-SOX one. Furthermore, we show that the SOX ban on NAS would actually make auditors better off than before if NAS budgets remain at, or exceed, the pre-SOX amounts. This result holds even if NAS budgets were reduced but not drastically.

Keywords: Auctions, Auditing, Audit Fees, Nonaudit Services, Serbanes-Oxley

Suggested Citation

Elitzur, Ramy and Gavious, Arieh and Minchuk, Yizhaq, Audit Fees Post-SOX: An Auction Model (June 2015). Rotman School of Management Working Paper No. 2626146, Available at SSRN: https://ssrn.com/abstract=2626146 or http://dx.doi.org/10.2139/ssrn.2626146

Ramy Elitzur (Contact Author)

University of Toronto - Rotman School of Management ( email )

105 St. George Street
Toronto, Ontario M5S 3E6 M5S1S4
Canada

Arieh Gavious

Ben-Gurion University of the Negev ( email )

POB 653
Beer Sheva, 8410501
Israel

Yizhaq Minchuk

Shamoon College of Engineering ( email )

Basel street
Beer-Sheva, 84100
Israel

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
88
Abstract Views
888
rank
237,831
PlumX Metrics