Related Party Transactions and Audit Fees: Indian Evidence

41 Pages Posted: 17 Jun 2022

See all articles by Narendra Nath Kushwaha

Narendra Nath Kushwaha

Ahmedabad University

Abhinav Anand

IIM Bangalore

M Jayadev

Indian Institute of Management (IIMB), Bangalore

Kannan Raghunandan

Florida International University (FIU)

Date Written: June 17, 2022

Abstract

We examine the effect of related party transactions (RPTs) on audit fees in Indian public companies. RPTs can be used to manipulate financial statements as well as transfer wealth between firms and their related parties, and the presence of RPTs increases audit risk. We find that related party sales are associated with 17.4 percent increase in audit fees, indicating that such transactions increase the audit risk and require significant additional audit effort.

Keywords: auditing, audit risk; audit fees; related party transactions; corporate governance

JEL Classification: G34; M41; M42

Suggested Citation

Kushwaha, Narendra Nath and Anand, Abhinav and Jayadev, M and Raghunandan, Kannan, Related Party Transactions and Audit Fees: Indian Evidence (June 17, 2022). IIM Bangalore Research Paper No. 667, Available at SSRN: https://ssrn.com/abstract=4139071 or http://dx.doi.org/10.2139/ssrn.4139071

Narendra Nath Kushwaha (Contact Author)

Ahmedabad University ( email )

Commerce Six Roads
Ahmedabad, Gujarat 380009
India
9047161407 (Phone)

Abhinav Anand

IIM Bangalore ( email )

Bannerghatta Road
Bangalore, 560 076
India

M Jayadev

Indian Institute of Management (IIMB), Bangalore

Bannerghatta Road
Bangalore, Karnataka 560076
India

Kannan Raghunandan

Florida International University (FIU)

1101 Brickell Ave Ste 1100S
Miami, FL 33131-3113
United States

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