The association between audit committees,compensation incentives,and corporate audit fees |
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Authors: | Nikos Vafeas James F Waegelein |
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Institution: | (1) Department of Public and Business Administration, University of Cyprus, Kallipoleos 75, Nicosia, 1678, Cyprus;(2) School of Business, Emporia State University, 1200 Commercial St., Box 4057, Emporia, KS. 66801-5087, USA |
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Abstract: | This study uses audit fee data from the 2001–2003 reporting periods to examine the relationship between measures of audit
committee effectiveness and compensation incentives with corporate audit fees. Our results suggest that audit committee size,
committee member expertise, and committee member independence are positively associated to audit fee levels, consistent with
the notion that audit committees serve as a complement to external auditors in monitoring management. In contrast, CEO long-term
pay and insider ownership are inversely related to audit fee levels, substituting for external audit effort in motivating
management. Notwithstanding results on the full sample of firm-years, we uncover significant differences in the determinants
of audit fees between the years examined. An important implication of these results is that explaining the intra-firm variation
in audit fees over time is clearly necessary in order to understand the antecedents and consequences of audit fees.
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Keywords: | Audit committees Executive compensation Audit fees |
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