CEO Turnover and Audit Pricing

• In Event: Continental Breakfast and Research & Education Forum
  In Roundtable Session: Table 13: Auditor Pricing Studies

Abstract

This study examines the relation between CEO turnover in client companies
and the fees charged by their audit firms. We propose that forced CEO turnover (such as dismissals) have higher risk for the audit firm than voluntary turnover (such as retirements); further, greater risk leads to higher audit prices. We develop a regression model of audit fees that includes, as predictor variables, type of CEO turnover and control variables identified in prior studies (e.g., ROA, total assets, corporate governance). Results reveal that companies with forced CEO turnover have significantly higher audit fees than companies with either voluntary turnover or no turnover. Further, we find no difference in audit fees between firms with voluntary turnover and firms without turnover.

Authors

• Yun-Chia Yan, The University of Texas at Brownsville

• Robert James Parker, University of New Orleans

• Hua-Wei Huang, National Cheng Kung University

• Yi-Hung Lin, National Cheng Kung University