School of Accountancy Faculty Publications and Presentations
Document Type
Article
Publication Date
12-2022
Abstract
Using a sample of U.S. firms from 2003 to 2018, we examine the effect of an audit client’s code of ethics quality on audit fees. We find that clients with a lower code of ethics quality pay significantly higher audit fees, suggesting that auditors perceive such clients as riskier and charge greater risk premiums. We also find that such clients have higher litigation risk and auditors spend greater effort when auditing such clients. Our study is among the first to demonstrate the role of a client’s code of ethics quality in audit pricing. Overall, our findings are consistent with codes of ethics being useful to auditors in assessing managers’ financial representations and providing value to firms.
Recommended Citation
Duong, H.K., Gotti, G., Stein, M.T. and Chen, A., 2022. Code of ethics quality and audit fees. Journal of Accounting and Public Policy, 41(6), p.107001. https://doi.org/10.1016/j.jaccpubpol.2022.107001
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Publication Title
Journal of Accounting and Public Policy
DOI
https://doi.org/10.1016/j.jaccpubpol.2022.107001
Comments
Original published version available at https://doi.org/10.1016/j.jaccpubpol.2022.107001