The Association between Regulatory Quality and Auditor Fee Premiums

• In Event: Governance and regulatory issues

Abstract

We first confirm the findings of Carson (2009) that global industry specialist auditors earn a fee premium, using a larger and more extended time period. We then examine the effect of regulatory quality on the association between auditor industry specialization and audit fees. Our results indicate fee premiums of global auditors and various types of industry specialists are present in both high and low regulatory environments. These results suggest that high quality auditors can act as both a complement (to higher) and a substitute (for lower) regulatory quality. However, we find statistically and economically larger fee premiums for high quality auditors in countries with stricter regulatory quality. Finally, we document that different inferences may be obtained depending on which data source is used in studies examining audit fees in a global setting.

Authors

• Kannan Raghunandan, Florida International University

• William Riccardi, University at Albany