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David D. Williams – One of the best experts on this subject based on the ideXlab platform.

  • long term trends in Audit Fees
    Ear and Hearing, 2001
    Co-Authors: Krishnagopal Menon, David D. Williams

    Abstract:

    The Audit Fees literature contains little by way of systematic evidence on long‐term trends in Audit Fees. This study analyzes trends in Audit Fees from 1980 through 1997, adjusting for changes in client size, complexity, and risk. The sample is restricted to clients of Big 6 firms that voluntarily disclosed Audit Fees in the period 1980–1997. Evidence is found that Audit Fees increased in the 1980s but stayed flat in the 1990s. Most important, a significant increase is noted in 1988, the year in which the Auditing Standards Board issued the “expectation gap” standards. These results hold even after controlling for wage increases in accounting firms, suggesting an expansion of Auditing effort. There is no evidence that Auditors obtain any price premium from industry specialization. The 1989 Big 8 mergers appear to have had a short‐term, but not long‐term, effect on Fees. Finally, the magnitude of the Audit fee model coefficient for accounts receivable and inventory has declined over the period, presumably…

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  • Long‐Term Trends in Audit Fees
    AUDITING: A Journal of Practice & Theory, 2001
    Co-Authors: Krishnagopal Menon, David D. Williams

    Abstract:

    The Audit Fees literature contains little by way of systematic evidence on long‐term trends in Audit Fees. This study analyzes trends in Audit Fees from 1980 through 1997, adjusting for changes in client size, complexity, and risk. The sample is restricted to clients of Big 6 firms that voluntarily disclosed Audit Fees in the period 1980–1997. Evidence is found that Audit Fees increased in the 1980s but stayed flat in the 1990s. Most important, a significant increase is noted in 1988, the year in which the Auditing Standards Board issued the “expectation gap” standards. These results hold even after controlling for wage increases in accounting firms, suggesting an expansion of Auditing effort. There is no evidence that Auditors obtain any price premium from industry specialization. The 1989 Big 8 mergers appear to have had a short‐term, but not long‐term, effect on Fees. Finally, the magnitude of the Audit fee model coefficient for accounts receivable and inventory has declined over the period, presumably…

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Santanu Mitra – One of the best experts on this subject based on the ideXlab platform.

  • managerial overconfidence ability firm governance and Audit Fees
    Review of Quantitative Finance and Accounting, 2019
    Co-Authors: Santanu Mitra, Bikki Jaggi, Talal Alhayale

    Abstract:

    Prior studies document that managerial overconfidence potentially increases the risk of financial misstatements, and that overconfident managers purchase lower quality Audits and pay lower Audit Fees. As a part of the research that evaluates the information value of managerial characteristics to Auditors, our study examines how the relationship between managerial overconfidence and Audit Fees is impacted by managerial ability, and board and Audit committee effectiveness in the post-Sarbanes–Oxley (post-SOX) environment. In general, we find a significantly positive relationship between managerial overconfidence and Audit Fees consistent with the supply-side risk based perspective of Audit pricing. However, this relationship is significantly attenuated in higher managerial ability firms where overconfident managers are better able to make proper accounting estimates and judgements required for producing reliable financial statements, and synthesize firm-specific information into appropriate forward looking projections. We find that on an average, the overconfident firms with higher managerial ability pay 6.3% lower Audit Fees than the overconfident firms with lower managerial ability. Our analyses further show that board characteristics positively impact the relationship between managerial overconfidence and Audit Fees, suggesting that stronger board monitoring increases the demand for higher quality Audits to mitigate the reporting risk of the overconfident firms. On an average, the firms with managerial overconfidence pay additional 9.3% higher Audit Fees when they are subject to stronger and more effective board oversight. However, we find weaker evidence on the effect of Audit committee characteristics on Audit Fees of the overconfident firms. Our primary results hold for a battery of supplemental tests including the tests using propensity-score matched sample. The study contributes to Audit fee and corporate governance literature, and has useful implications for regulators, accounting practitioners, and Auditors.

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  • Organized Labor and Audit Fees
    Accounting Horizons, 2017
    Co-Authors: Lin Cheng, Santanu Mitra, Hakjoon Song

    Abstract:

    SYNOPSIS: This study investigates the empirical relationship between organized labor and Audit Fees. We find that Audit Fees are negatively related to the firm-level unionization rate—the higher the unionization rate, the lower the Audit Fees. We further observe that the unionized firms are less likely to hire Big 4 or industry-specialist Auditors. Additional analyses show that the negative relationship between the firm-level unionization rate and Audit Fees is significantly attenuated for unionized firms with poor financial performance. Our results are consistent with unionized firms preferring less Audit scrutiny, which helps them maintain information asymmetry with the labor unions. The study facilitates our understanding of firms’ demand for Audit services and the consequential effect on Audit Fees when faced with strong organized labor, and adds to the extant literature investigating the impact of organized labor on various aspects of firms’ financial reporting decisions. JEL Classifications: M41; M4…

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  • The empirical relationship between ownership characteristics and Audit Fees
    Review of Quantitative Finance and Accounting, 2007
    Co-Authors: Santanu Mitra, Mahmud Hossain, Donald R. Deis

    Abstract:

    The present study examines the empirical relationship between ownership characteristics and Audit Fees. The basic premise is that the level of ownership sophistication and the extent to which ownership is large and substantial impact the effectiveness of stockholder monitoring on corporate affairs including the financial reporting process. Furthermore, high managerial ownership firms may experience a decline in agency problems in financial reporting due to a decrease in managerial propensity to misreport financial results. By employing a cross-sectional least squares regression analysis for a sample of 358 New York Stock Exchange-listed firms Audited by the Big Five Auditors, we find evidence of a significantly positive relationship between diffused institutional stock ownership (i.e., having less than 5% individual shareholding) and Audit Fees, and a significantly negative relationship between institutional blockholder ownership (i.e., having 5% or more individual shareholding) and Audit Fees. Finally, we document that managerial stock ownership is negatively associated with Audit Fees. We do not, however, find evidence of any relationship between noninstitutional blockholder ownership (with at least 5% individual stock ownership) and Audit Fees. The study’s main results hold in various specification tests including when the effects of board-related and Audit committee variables are factored in the analysis. Based on the observed relationship between the ownership variables and Audit Fees, we suggest that the ownership characteristics of a firm as a part of its governance mechanism constitute an important determinant of Audit Fees.

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Krishnagopal Menon – One of the best experts on this subject based on the ideXlab platform.

  • long term trends in Audit Fees
    Ear and Hearing, 2001
    Co-Authors: Krishnagopal Menon, David D. Williams

    Abstract:

    The Audit Fees literature contains little by way of systematic evidence on long‐term trends in Audit Fees. This study analyzes trends in Audit Fees from 1980 through 1997, adjusting for changes in client size, complexity, and risk. The sample is restricted to clients of Big 6 firms that voluntarily disclosed Audit Fees in the period 1980–1997. Evidence is found that Audit Fees increased in the 1980s but stayed flat in the 1990s. Most important, a significant increase is noted in 1988, the year in which the Auditing Standards Board issued the “expectation gap” standards. These results hold even after controlling for wage increases in accounting firms, suggesting an expansion of Auditing effort. There is no evidence that Auditors obtain any price premium from industry specialization. The 1989 Big 8 mergers appear to have had a short‐term, but not long‐term, effect on Fees. Finally, the magnitude of the Audit fee model coefficient for accounts receivable and inventory has declined over the period, presumably…

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  • Long‐Term Trends in Audit Fees
    AUDITING: A Journal of Practice & Theory, 2001
    Co-Authors: Krishnagopal Menon, David D. Williams

    Abstract:

    The Audit Fees literature contains little by way of systematic evidence on long‐term trends in Audit Fees. This study analyzes trends in Audit Fees from 1980 through 1997, adjusting for changes in client size, complexity, and risk. The sample is restricted to clients of Big 6 firms that voluntarily disclosed Audit Fees in the period 1980–1997. Evidence is found that Audit Fees increased in the 1980s but stayed flat in the 1990s. Most important, a significant increase is noted in 1988, the year in which the Auditing Standards Board issued the “expectation gap” standards. These results hold even after controlling for wage increases in accounting firms, suggesting an expansion of Auditing effort. There is no evidence that Auditors obtain any price premium from industry specialization. The 1989 Big 8 mergers appear to have had a short‐term, but not long‐term, effect on Fees. Finally, the magnitude of the Audit fee model coefficient for accounts receivable and inventory has declined over the period, presumably…

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