CEO Equity Incentives and Audit Fees

Financially Qualified Members in an Upper Echelon and Their Relationship with Corporate Sustainability: Evidence from an Emerging Economy

“…Similarly, CS is slightly negatively correlated with CEO duality if FQD in AC has an expertise in management (coefficient = −0.00281124; column 3) and with ACM*CEOD (coefficient = −0.0015231; column 3). These results are all statistically insignificant, however are inconsistent with prior studies [85,123,124] which suggests that CS can be effected by CEO duality. Therefore, the present results support for Hypothesis 2.…”

How do auditors perceive CEO's risk-taking incentives?

“…Kim et al . () argue that, if auditors perceive CEOs have incentives to manage earnings for personal financial gain, auditors would assess the risk of earnings manipulation as higher, which will result in higher audit fees. Consistent with their prediction, they find a positive association between CEO stock options and audit fees.…”

CEO power and audit fees: Evidence from Malaysia

“…These firm characteristics, as argued by Simunic's () supply‐side perspective, affect the scope of audit work and, in turn, the level of audit fees. For instance, prior studies found that audit efforts are reduced if audit partners assess a lower risk of material misstatements (Kim, Li, & Li, ) and fraudulent reporting (Bell, Landsman, & Shackelford, ) and vice versa (Bedard & Johnstone, ; Srinidhi et al, ). This is substantiated by recent findings which show that US firms with family ownership incur lower audit fees, since they are able to mitigate Type 1 agency problems (Ho & Kang, : Srinidhi et al, ; Ghosh & Tang, ).…”

“…Simunic's audit fee model () suggests that the audit fee is influenced by audit effort. The literature suggests that auditors increase audit efforts in firms that are assessed to have higher business risk (Bell et al, ; Srinidhi et al, ), higher risk of material misstatement (Ghosh & Tang, ), lower earnings quality (Fan & Wong, ), higher risk of accounting fraud (Kim et al, ), and poor firm governance (Bedard & Johnstone, ; Ho & Kang, ). Since evidence suggests that the entrenchment effect is more dominant in Malaysian family firms, auditors assign them higher risks of fraudulent reporting or financial misstatement.…”

“…At a glance, results from Table suggest that auditor choice may have explained why CEO power is associated with lower audit fees. However, the supply side theory (Simunic, ) argues and shows that audit risk is lower in firms with higher accruals quality (Kim et al, ; Srinidhi et al, ), strong firm governance (Bedard & Johnstone, ; Srinidhi et al, ), higher financial performance (Bell et al, ; Ho & Kang, ), and lower financial leverage (Ghosh & Tang, ). As hypothesized, this study argues that CEO power can indirectly influence audit fees via accruals quality, firm governance, financial performance, and financial leverage.…”