The Association between Audit Committee Characteristics and Audit Fees

Abstract

This study examines the association between audit committee characteristics and audit fees, using data gathered under the recent SEC fee disclosure rules. We hypothesize that audit fees will be positively associated with audit committee independence, financial expertise, and meeting frequency. We examine a sample of 492 nonregulated, Big 5-audited firms that filed proxy statements with the SEC in the period from February 5, 2001 to June 30, 2001. We find that audit committee independence (defined as an audit committee comprised entirely of outside, independent directors) and financial expertise (defined as an audit committee containing at least one member with financial expertise) are significantly, positively associated with audit fees. This is in contrast to the findings of Carcello et al. (2002a), who find that audit committee characteristics are not significant in the presence of board-related variables. Meeting frequency (defined as an audit committee that meets at least four times annually) was not associated with higher audit fees at conventional levels. This evidence is consistent with audit committees taking actions within their span of control to ensure a higher level of audit coverage.

Corporate Governance Quality and Audit Quality in Malaysia

“…However, this finding contrasted that of [11,14,17]. The results found in [12] on the relationship between audit committee expertise and audit fees also contrasted with the findings of [13,16,15,17]. Similarly, [15] and [17] found that the frequency of audit committee meetings has a significant and positive relationship with audit fees did not support the findings of [11] and [12].…”

“…[15] and [12] found that audit committee independence has a significant and positive relationship with audit fees. However, this finding contrasted that of [11,14,17].…”

“…These studies are based on settings in the US [11,12,13], the UK [14,15,16], Australia [17] and Malaysia [18,19,20].…”

“…This paper examines the impact of corporate governance quality on audit quality in Malaysia. The sampling frame is 457 Malaysian non-finance listed companies, over the periods 2003 (pre-2007 Code period) and 2008to 2012 (post -2007 Code period), consisting of 2,285 observations for each period. This study uses pooled ordinary least square (OLS) to test the research hypotheses and model.…”

The Effect of Board of Directors Characteristics, Audit Committee Characteristics and Executive Committee Characteristics on Firm Performance in Oman: An Empirical Study

“…Hsu & Petchsakulwong, 2010;Khanchel, 2007;Kyereboah-Coleman, 2007;Mohd et al, 2009). Abbott, Peters and Raghunandan (2003) stated that frequent meetings of audit committee may lead to the improvement of the financial accounting processes which in turn, leads to superior performance. Sharing the same perspective is the resource dependence theory that stated that the board meeting helps the board to valuate and pursue a board business from time to time and to solve any problem encountered by employees (Pearce & Zahra, 1992;Pfeffer, 1987).…”