NDLI: Abnormal audit fees and audit quality: initial evidence from the German audit market

Content Provider	Springer Nature Link
Author	Krauß, Patrick Probis, Paul Zülch, Henning
Copyright Year	2014
Abstract	This study investigates the economic auditor–client dependency issue by examining the association between abnormal audit fee pricing and audit quality. Our study is the first to analyze this phenomenon empirically for the institutional setting of German IFRS firms by using a sample of 2,334 firm-year observations for the period from 2005 to 2010. Our empirical results demonstrate that positive abnormal audit fees are negatively associated with audit quality and imply that the audit fee premium is a significant indicator of compromised auditor independence due to economic auditor–client bonding. Audit fee discounts generally do not lead to a reduced audit effort, or respectively, audit quality is not impaired when client bargaining power is strong. The association of positive abnormal audit fees and audit quality is robust to different audit quality surrogates such as absolute discretionary accruals, financial restatements, and meeting or beating analysts’ earnings forecasts.
Starting Page	45
Ending Page	84
Page Count	40
File Format	PDF
ISSN	00442372
Journal	Zeitschrift für Betriebswirtschaft
Volume Number	85
Issue Number	1
e-ISSN	18618928
Language	English
Publisher	Springer Berlin Heidelberg
Publisher Date	2014-02-04
Publisher Place	Berlin, Heidelberg
Access Restriction	One Nation One Subscription (ONOS)
Subject Keyword	Abnormal audit fees Auditor independence Auditor–client economic bonding Audit quality Earnings management Business/Management Science Production/Logistics/Supply Chain Organization/Planning Human Resource Management Accounting/Auditing Business Taxation/Tax Law
Content Type	Text
Resource Type	Article
Subject	Business and International Management Economics and Econometrics

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