Do Corporate Governance Measures Impact Audit Pricing of Smaller Firms? Evidence from the United States and New Zealand
The International Journal of Business and Finance Research, v. 12 (2) p. 77-94, 2018
18 Pages Posted: 28 Feb 2019
Date Written: 2018
Motivated primarily by the claims that audit committee independence and accounting expertise and CEO compensation influence audit fees, this study examines the effect of such factors, on audit fees in two different institutional settings in the post-Sarbanes Oxley Act (SOX) era. The institutional settings are those of the U.S. and New Zealand audit markets, where the U.S. market is more regulated and litigious than the New Zealand market. The study sample comprises firms of similar size from each country. Firms in the U.S. with higher audit committee accounting expertise charge higher audit fees than New Zealand firms. The results also suggest that short-term incentives and total compensation in both the countries are considered as audit risk and priced accordingly even though N.Z. firms operate in a different regulatory environment. Study findings suggest that firms with better corporate governance arrangements in the post-SOX era in the U.S. demand a better audit effort from audit firms and pay higher audit fees.
Keywords: New Zealand, Audit Fees, SOX, IFRS
JEL Classification: M42, M48, M49
Suggested Citation: Suggested Citation