The Impact of Board Reforms on Audit Fees: International Evidence

Authors

Incheol Kim, The University of Texas Rio Grande ValleyFollow
Joon Ho Kong
Rong Yang

Document Type

Article

Publication Date

2-2024

Abstract

In this study, we investigate whether and to what extent country-level board reforms affect audit pricing decisions. We find audit fees are positively associated with board reforms. An increase in audit fees is more pronounced for firms that switched up to Big N auditors following board reforms. After board reforms, firms are less likely to issue restatements, and both analyst forecast accuracy and management forecast frequency increase, indicating improved audit quality and information transparency in the postreform period. Moreover, the positive relation between board reforms and audit fees is more evident for firms in countries that lack institutional governance mechanisms, captured by emerging capital markets, high political risk, weak governmental enforcement actions and low corporate governance quality. Overall, our findings broadly support the view that audit fees increase upon demand for better audit quality.

Comments

Original published version available at https://onlinelibrary.wiley.com/share/X6XQPFR3ZU9BF8MI88ND?target=10.1111/jbfa.12685

Publication Title

Journal of Business Finance and Accounting

DOI

10.1111/jbfa.12685

Recommended Citation

Kim, I., Kong, J. H., & Yang, R. (2024). The impact of board reforms on audit fees: International evidence. Journal of Business Finance & Accounting, 51, 45–83. https://doi.org/10.1111/jbfa.12685