Audit Fee Trends from 2000 to 2014

• In Event: Breakfast and Rountable
  In Paper Session: Table 2

Abstract

Audit fees are a constant source of stress for auditors who must on one hand comply with increasing government regulations that generally cause costs to rise, and on the other hand respond to client pressures to keep audit fees down. In the post-scandal environment of Enron, WorldCom, and the demise of Arthur Andersen, policy makers have not only increased regulations that auditors must follow but have also created a new watchdog for the public accounting profession. In this environment of constant tension for the auditor, our study examines the long-term audit fee trends from 2000 to 2014. As a result of new government regulations that require additional work for the auditor, we anticipate a corresponding increase in audit fees. However, we anticipate a decrease in audit fees as the auditor gains efficiencies. We examine audit fee trends while controlling for changes in fees due to inflation, auditor wages, and audit fee determinants. Our findings indicate that audit fees increased after the passage of new audit regulations such as the Sarbanes-Oxley Act of 2002, Section 404 in 2004, Auditing Standards No. 2 in 2004, and decreased after the passage of Auditing Standards No. 5 in 2007. The findings of this research are relevant to audit clients, auditors, and regulations in understanding general audit fee trends, and in understanding some of the financial impact of their regulations.

Authors

• Lucy Lim, Howard University

• R. Mithu Dey, Howard University