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Audit committee effectiveness and non-audit service fees: Evidence from UK family firms

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  • Al-Okaily, Jihad
  • BenYoussef, Nourhene

Abstract

This study examines whether the presence of an ineffective audit committee at family and non-family firms can influence the firms’ non-audit service purchases from the incumbent auditor. Using a sample of 1736 observations of UK-listed companies from 2005 to 2013, we find a significant positive association between ineffective audit committees and non-audit service fees. This association is more pronounced for family than for non-family firms, suggesting that in the UK, family firms with ineffective audit committees tend to buy more non-audit services from their incumbent auditors than non-family firms. The results also show that family firms with ineffective audit committees pay higher non-audit service fees when their family members own shares or hold board positions, indicating that both types of involvement lead to larger non-audit service expenditures.

Suggested Citation

  • Al-Okaily, Jihad & BenYoussef, Nourhene, 2020. "Audit committee effectiveness and non-audit service fees: Evidence from UK family firms," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 41(C).
    • Handle: RePEc:eee:jiaata:v:41:y:2020:i:c:s1061951820300574
    DOI: 10.1016/j.intaccaudtax.2020.100356
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    Cited by:

    1. Marius Eugen Rogoz & Dragos Andrei Stoica & George-Aurelian Tudor, 2022. "Corporate Governance In The Setting Up And Operation The Audit Committees Of Bse Listed Companies," Annals - Economy Series, Constantin Brancusi University, Faculty of Economics, vol. 2, pages 18-31, April.
    2. Anggita Langgeng WIJAYA & Ima Widha RATNASARI, 2023. "The Effect of the Audit Committee on the Firm Value of State-Owned Enterprises in Indonesia: The Mediation Role of Financial Performance," CECCAR Business Review, Body of Expert and Licensed Accountants of Romania (CECCAR), vol. 4(6), pages 60-72, June.
    3. Habiba Al-Shaer & Muhammad Farhan Malik & Mahbub Zaman, 2022. "What do audit committees do? Transparency and impression management," Journal of Management & Governance, Springer;Accademia Italiana di Economia Aziendale (AIDEA), vol. 26(4), pages 1443-1468, December.

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    More about this item

    Keywords

    Agency problem; Audit committee; Auditor independence; Corporate governance; Family firms; Non-audit service fees; UK;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance

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