Audit Pricing of Shared Leadership

49 Pages Posted: 21 Aug 2016

See all articles by Younsik Choi

Younsik Choi

Seoul National University - College of Business Administration

Jiwon Hyeon

Seoul National University

Taejin Jung

Seoul National University

Woo-Jong Lee

Seoul National University

Date Written: August 17, 2016

Abstract

This study explores audit implications of shared leadership in client firms. Shared leadership via co-CEO appointments may lead to either suboptimal or optimal managerial decisions, depending on the conflicting or complementary dynamics between multiple CEOs. Analyzing data from 2002 to 2013 of Korean listed companies where co-CEO structure is widespread, we find that auditors spend fewer audit hours and charge lower audit fees for clients with multiple CEOs. Additional tests reveal that hourly fees are not significantly different across clients with or without co-CEOs. Collectively, our findings suggest that the lower audit fees for co-CEO clients are likely attributable to reduced audit effort rather than to a reduced hourly fee. In further searches of specific channels through which audit fees are reduced for the co-CEO clients, we present evidence that firms with co-CEOs exhibit better reporting quality than do firms with a solitary CEO. In sum, the findings of this paper suggest that mutual monitoring via co-CEO appointments assures high quality financial reporting of audit clients, and thus leads to reduced audit fees.

Keywords: Audit Fees, Audit Effort, Audit Hours, Co-CEOs, Shared Leadership

JEL Classification: M42, G34

Suggested Citation

Choi, Younsik and Hyeon, Jiwon and Jung, Taejin and Lee, Woo-Jong, Audit Pricing of Shared Leadership (August 17, 2016). Available at SSRN: https://ssrn.com/abstract=2825672 or http://dx.doi.org/10.2139/ssrn.2825672

Younsik Choi

Seoul National University - College of Business Administration ( email )

Seoul, 151-742
Korea, Republic of (South Korea)

Jiwon Hyeon

Seoul National University ( email )

1 Gwanak-ro, Gwanak-gu
Seoul, 08826
Korea, Republic of (South Korea)

Taejin Jung

Seoul National University ( email )

Kwanak-gu
Seoul, 151-742
Korea, Republic of (South Korea)

Woo-Jong Lee (Contact Author)

Seoul National University ( email )

Gwanak-ro 1, Gwanak-gu
Seoul, 151-916
Korea, Republic of (South Korea)

Register to save articles to
your library

Register

Paper statistics

Downloads
75
Abstract Views
850
rank
312,710
PlumX Metrics