ATJ Asian Tax Journal

Asian Tax Journal

Print ISSN 1738-3323 Online ISSN 2733-9270

Empirical Study on Relation between Abnormal Audit Fees and Financial Reporting Quality Using Audit Efforts Residuals －Implication of Excessive Audit Fees－

  • Kwang Wuk Oh Korea University

Asian Tax Journal Vol. 18 No. 1 (2017), pp. 171-199

Abstract

The study investigates the property of abnormal excessive audit fees using large samples in Korea listed firm. Specifically, the study shows the empirical results about ① relation between excessive abnormal audit fees and excessive audit efforts and ② tests the property of excessive abnormal audit fees by examining the direction between excessive abnormal audit fees and financial reporting quality(such as financial statement comparability and accruals quality) by grouping the sample with abnormal audit efforts. Following are the results：First, tests show the positive relation between excessive abnormal audit fees and efforts, implying that excessive abnormal audit fees may include extra risk premium and efforts inducing audit inefficiency. Second, tests show that excessive abnormal audit fees have the negative relation with financial reporting quality in the sub－sample firms which auditors put excessive audit efforts. These results consistently supports the argument by Higgs and Skantz (2006) that excessive

Keywords

  • Abnormal Audit Fees
  • Abnormal Audit Efforts
  • Financial Statement Comparability
  • Accruals Quality

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Asian Tax Journal

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