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Audit Committee Characteristics and Low-balling of Audit Fees

송보미|최종학|최보규
한국공인회계사회 (THE KOREAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS)|2015.06|회계ㆍ세무와 감사 연구 (Study on Accounting, Taxation & Auditing)|제57권 제2호|pp. 31-66|DOI 10.22781/kicpa.2015.57.2.31

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참고문헌

키워드

감사위원회audit committee감사보수감사품질audit qualitylow-ballingaudit fees초도감사 보수할인
주제분류회계학

초록

This paper aims to investigate whether audit committees with certain characteristics effectively avoid initial engagement year audit fee discounts or so called ‘low-balling’. Regulators have great concern on the potential detrimental effect of low-balling on audit quality. Effective audit committees may not be attracted with auditor’s fee cutting in the initial engagement year because the committees have a great concern in maintaining high quality of audit. We classify audit committees based on four aspects that signify the quality of the committees: independence, financial expertise, meeting frequency, and tenure. Consistent with prior research, we find that low-balling of audit fees exists in Korean audit market and audit committee independence and meeting frequency are positively associated with the level of audit fees. In particular, audit committees with frequent meetings prevent audit fee discounts in the first engagement year, suggesting that a diligent audit committee plays an important role to maintain high audit quality.

Abstract

This paper aims to investigate whether audit committees with certain characteristics effectively avoid initial engagement year audit fee discounts or so called ‘low-balling’. Regulators have great concern on the potential detrimental effect of low-balling on audit quality. Effective audit committees may not be attracted with auditor’s fee cutting in the initial engagement year because the committees have a great concern in maintaining high quality of audit. We classify audit committees based on four aspects that signify the quality of the committees: independence, financial expertise, meeting frequency, and tenure. Consistent with prior research, we find that low-balling of audit fees exists in Korean audit market and audit committee independence and meeting frequency are positively associated with the level of audit fees. In particular, audit committees with frequent meetings prevent audit fee discounts in the first engagement year, suggesting that a diligent audit committee plays an important role to maintain high audit quality.

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