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Auditor Sharing in the Mutual Fund Industry: Empirical Evidence on Determinants and Audit Fees

50 Pages Posted: 4 Sep 2015  

John C. Adams

University of Texas at Arlington

Takeshi Nishikawa

University of Colorado at Denver

Stephanie J. Rasmussen

University of Texas at Arlington

Date Written: August 2015

Abstract

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

Adams, John C. and Nishikawa, Takeshi and Rasmussen, Stephanie J., Auditor Sharing in the Mutual Fund Industry: Empirical Evidence on Determinants and Audit Fees (August 2015). Available at SSRN: https://ssrn.com/abstract=2654839 or http://dx.doi.org/10.2139/ssrn.2654839

John C. Adams

University of Texas at Arlington ( email )

Box 19449 UTA
Arlington, TX 76019
United States
904-476-2946 (Phone)

Takeshi Nishikawa

University of Colorado at Denver ( email )

Box 173364
1250 14th Street
Denver, CO 80217
United States

Stephanie J. Rasmussen (Contact Author)

University of Texas at Arlington ( email )

Box 19468
Arlington, TX 76019-0468
United States

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