Audit Committee Accounting Expertise and the Mitigation of Strategic Auditor Behavior

• 成果类型: Article
• 署名作者: Hansen, James C.; Lisic, Ling Lei; Seidel, Timothy A.; Wilkins, Michael S.
• 署名单位: Utah System of Higher Education; Weber State University; Virginia Polytechnic Institute & State University; Brigham Young University; University of Kansas
• 刊物名称: ACCOUNTING REVIEW
• ISSN/ISSBN: 0001-4826
• DOI: 10.2308/TAR-2018-0101
• 发表日期: 2021
• 页码: 289-314
• 关键词: internal control; corporate governance; Sarbanes-Oxley; LITIGATION RISK; QUALITY; fees; services; INDEPENDENCE; CONSEQUENCES; association

摘要

Our study is motivated by the theory of credence goods in the auditing setting. We propose that audit committee accounting expertise should reduce information asymmetries between the auditor and the client, thereby limiting auditors' ability to over-audit and under-audit. Consistent with this notion, our results indicate that when audit committees have accounting expertise, clients (1) pay lower fees when changes in standards decrease required audit effort; (2) pay a smaller fee premium in the presence of remediated material weaknesses; and (3) have a reduced likelihood of restatement when audit market competition is high. Our findings in the under-auditing setting generally are strongest among non-Big 4 engagements, consistent with non-Big 4 auditors being less sensitive to market-wide disciplining mechanisms such as reputation, legal liability, and professional regulation. We also provide evidence that the nature of audit committee members' accounting expertise differentially impacts the committee's ability to curtail over- and under-auditing.