How does the type of equity compensation of audit committee affect audit fees? |
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| Institution: | 1. Accounting Department, College of Business, Frostburg State University, 101 Braddock Rd, Frostburg, MD 21532, United States of America;2. Department of Accounting & Finance, School of Business & Management, Morgan State University, 1700 Cold Spring Lane, Baltimore, MD 21251, United States of America;1. Department of Accounting, College of Business and Management, Tamkang University, Taiwan R.O.C;2. Department of Business Administration, College of Management, National Changhua University of Education, Taiwan R.O.C;3. College of Business Administration and Public Policy, California State University—Dominguez Hills, United States;4. College of Business Administration, California State University—Stanislaus, One University Circle, United States;1. Binghamton University – SUNY, USA;2. The Ohio State University, USA;1. Florida International University, United States of America;2. University at Albany – SUNY, United States of AmericaThis article was accepted by Roger Graham;1. University of Gävle, Högskolan i Gävle, 801 76 Gävle, Sweden;2. Mid Sweden University, Department of Business, Economics and Law, Centre for Research on Economic Relations, SE-851 70 Sundsvall, Sweden;3. West Virginia University, Department of Accounting, PO Box 6025, 1601 University Avenue, Morgantown, WV 26506-6025, USA;1. University of Wisconsin-Milwaukee, United States;2. Louisiana State University, United States;3. University of North Dakota, United States |
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| Abstract: | Based on agency theory, if equity compensation aligns audit committee members' interests with those of shareholders, the audit committee will provide effective oversight and demand more thorough audit coverage and scope. This will result in higher audit fees paid to the external auditor. This study specifically examines the associations between the types of equity compensation of audit committee members and audit fees. Our findings show differential impacts of equity compensation of audit committee in the forms of option grants and stock awards on audit fees. Specifically, equity compensation using stock awards is more effective than using option grants in aligning the interests of audit committee members with the interests of shareholders to provide better oversight of financial reporting. |
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