Abnormal Audit Fees and Restatements

We investigate the relationship between audit fees and subsequent financial statement restatements in the years following the Sarbanes-Oxley Act of 2002 (SOX). After controlling for internal control quality, we find that abnormal audit fees are negatively associated with the likelihood that financia...

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Bibliographic Details
Published inAuditing : a journal of practice and theory Vol. 31; no. 1; pp. 79 - 96
Main Authors Blankley, Alan I., Hurtt, David N., MacGregor, Jason E.
Format Journal Article
LanguageEnglish
Published Sarasota Assoc 01.02.2012
American Accounting Association
Subjects
2004-2007
Accounting firms
Audit committees
Audit fees
Audit risk
Auditors
Bilanzpolitik
Dienstleistungsqualität
Financial reporting
Financial restatements
Financial statements
Gebühr
Hypotheses
Influence
Internal controls
Jahresabschluss
Nonaudit services
Public Company Accounting Reform & Investor Protection Act 2002-US
Studies
Wirtschaftsprüfung
United States > US
Online AccessGet full text
ISSN0278-0380
1558-7991
DOI10.2308/ajpt-10210

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Summary:We investigate the relationship between audit fees and subsequent financial statement restatements in the years following the Sarbanes-Oxley Act of 2002 (SOX). After controlling for internal control quality, we find that abnormal audit fees are negatively associated with the likelihood that financial statements are subsequently restated. This result conflicts with prior work that finds that audit fees are positively associated with future restatements. Overall, our evidence is consistent with the notion that restatements reflect low audit effort or underestimated audit risk in the periods leading up to the restatement year.
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ISSN:0278-0380
1558-7991
DOI:10.2308/ajpt-10210