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Title: Non-audit fees, institutional monitoring, and audit quality
Authors: Ding, David K.
Charoenwong, Charlie
Lim, Chee Yeow
Keywords: DRNTU::Business::Accounting
Issue Date: 2012
Source: Lim, C. Y., Ding, D. K., & Charlie, C. (2013). Non-audit fees, institutional monitoring, and audit quality. Review of quantitative finance and accounting, 41(2), 343-384.
Series/Report no.: Review of quantitative finance and accounting
Abstract: We posit that the effect of non-audit fees on audit quality is conditional on the extent of institutional monitoring. We suggest that institutional investors have incentives and the ability to monitor financial reporting quality. Because of the reputation concerns and potential litigation exposure, auditors are likely to provide high audit quality, when they also provide non-audit services to clients, particularly when clients are subject to high institutional monitoring. We find evidence that, as non-audit fees increase, audit quality (measured by performance-adjusted discretionary current accruals and earnings-response coefficients) reduces only for clients with low institutional ownership but not for clients with high institutional ownership. Our results are robust after controlling for auditor industry specialization, firms’ operating volatility, size effect, and potential endogeneity between institutional ownership and audit quality.
DOI: 10.1007/s11156-012-0312-1
Rights: © 2012 Springer Science + Business Media, LLC.
Fulltext Permission: none
Fulltext Availability: No Fulltext
Appears in Collections:NBS Journal Articles

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