Excess Audit Committee Compensation and Audit Pricing

International Journal of Accounting, Auditing and Performance Evaluation, Vol. 14, No. 2/3, 2018

Posted: 24 Aug 2017 Last revised: 21 Apr 2018

See all articles by Rachana Kalelkar

Rachana Kalelkar

University of Houston - Victoria

Sarfraz Khan

University of Louisiana at Lafayette

Sung-Jin Park

Indiana University South Bend

Date Written: August 20, 2017

Abstract

In this study, we explore audit pricing decisions in the presence of excess audit committee compensation. Specifically, we examine whether excess compensation of audit committee members is related to audit fees. We find that excess compensation is positively associated with audit fees. We further examine whether the excess compensation affects auditors pricing of earnings manipulation, and find evidence suggesting that auditors perceive earnings manipulation risk relatively low when the audit committee members are paid excess compensation. Overall, our results support the notion that audit committee excess compensation represents greater monitoring over a firms financial reporting process, which affects auditors' risk assessment.

Keywords: audit committee, compensation, audit fees

JEL Classification: M41, M42

Suggested Citation

Kalelkar, Rachana and Khan, Sarfraz and Park, Sung-Jin, Excess Audit Committee Compensation and Audit Pricing (August 20, 2017). International Journal of Accounting, Auditing and Performance Evaluation, Vol. 14, No. 2/3, 2018, Available at SSRN: https://ssrn.com/abstract=3023326

Rachana Kalelkar

University of Houston - Victoria ( email )

United States

Sarfraz Khan (Contact Author)

University of Louisiana at Lafayette ( email )

Department of Accounting
214 Hebrard Blvd.
Lafayette, LA 70508
United States

Sung-Jin Park

Indiana University South Bend ( email )

South Bend, IN 46634
United States

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