Religiosity, Financial Reporting, and Audit Fees

• In Event: Continental Breakfast and Research & Education Forum
  In Roundtable Session: Table 15: Auditing Pot Pourri

Abstract

We document in this study that religiosity has a significant impact on audit fees; our findings show that audit fees are lower for firms that have headquarters in the US counties with strong religious beliefs. Additionally, we find that the association between audit fees and religiosity is especially stronger for firms that are located in the rural areas because of greater uniformity in the religious beliefs of managers of firms located in these areas. We also find a stronger association between audit fees and religiosity of firms that are geographically concentrated in one location and not diversified over different geographic locations. Our supplementary analyses show that the negative association between audit fees and religiosity is valid only when firms have no pending legal suits against them and when firms do not issue restatements. With regard to the impact of other external monitoring factors, we find that the association between audit fees and religiosity is negative when institutional shareholdings are high, investors’ protection rights are high, and external debt is low.

Authors

• Hua Xin, Rutgers, The State University of New Jersey, Newark

• Bikki Jaggi, Rutgers, The State University of New Jersey, Newark