In Event: Continental Breakfast and Research & Education Forum
In Roundtable Session: Table 7: Effects of Auditor Oversight
This research investigates the association between the presence of problem directors on company boards and audit committees and audit fees of companies. The presence of problem directors on company boards and audit committees is a sign of past management failures and indiscretions. Such weaknesses on the board may require more enhanced audit procedures, which can lead to higher audit fees. Using a sample of 1,405 firm-year observations from 2004 to 2009 of S&P500 firms we find that the presence of problem directors on the company board and audit committees is indeed positively associated with positive abnormal audit fees. This issue has implications for investors, auditors, directors and regulators.