Auditor Sharing in the Mutual Fund Industry: Empirical Evidence on Determinants and Audit Fees
50 Pages Posted: 4 Sep 2015
Date Written: August 2015
This study examines auditor sharing by mutual fund trusts (collections of mutual funds) and parents (administrators of fund operations). We examine the determinants of auditor sharing and whether an association exists between trust audit fees and auditor sharing. Employing a sample of 2,369 trust-year observations during 2005-2010, we find that auditor sharing is positively associated with proxies for parent accounting capabilities, trustee fund ownership, and the presence of trustees who are retired or former employees of the parent. Conversely, auditor sharing is less likely for trusts with larger boards, longer-tenured trustees, and longer auditor tenure. We find that trusts with shared auditors pay higher audit fees, suggesting either a premium for shared auditors’ specialized knowledge or additional audit effort to compensate for shareholders’ concerns about trustees’ monitoring. Our findings offer insights into the audits of mutual funds and have implications for trustees as they consider auditor appointments.
Keywords: Mutual funds, Audit fees, Accounting quality, Board characteristics
JEL Classification: G23, G34, M41, M42
Suggested Citation: Suggested Citation