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Audit fee pressure and audit risk: evidence from the financial crisis of 2008

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  • Catherine Heyjung Sonu
  • Hyejin Ahn
  • Ahrum Choi

Abstract

This paper investigates whether the downward pressure on audit fees during crisis affects the audit fee structure. The empirical results reveal the following: First, audit fees dropped significantly during the financial crisis period. Second, auditors respond differently to small clients and risky clients when facing downward pressure on audit fees. Finally, the above mentioned findings are more pronounced when the client is under high pressure to reduce expenses. Collectively, the above results provide useful insights into how auditors behave when they are under pressure to reduce audit fees.

Suggested Citation

  • Catherine Heyjung Sonu & Hyejin Ahn & Ahrum Choi, 2017. "Audit fee pressure and audit risk: evidence from the financial crisis of 2008," Asia-Pacific Journal of Accounting & Economics, Taylor & Francis Journals, vol. 24(1-2), pages 127-144, April.
    • Handle: RePEc:taf:raaexx:v:24:y:2017:i:1-2:p:127-144
    DOI: 10.1080/16081625.2016.1208574
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    References listed on IDEAS

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    1. In†Mu Haw & Jay Junghun Lee & Woo†Jong Lee, 2014. "Debt Financing and Accounting Conservatism in Private Firms," Contemporary Accounting Research, John Wiley & Sons, vol. 31(4), pages 1220-1259, December.
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    5. Mark L. DeFond & K. Raghunandan & K.R. Subramanyam, 2002. "Do Non–Audit Service Fees Impair Auditor Independence? Evidence from Going Concern Audit Opinions," Journal of Accounting Research, Wiley Blackwell, vol. 40(4), pages 1247-1274, September.
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    Cited by:

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    3. Aljughaiman, Abdullah A. & Nguyen, Tam Huy & Trinh, Vu Quang & Du, Anqi, 2023. "The Covid-19 outbreak, corporate financial distress and earnings management," International Review of Financial Analysis, Elsevier, vol. 88(C).
    4. Marwan GHALEB & Burçin KAPLAN, 2020. "Branding and Yemeni Organizations’ Willingness to Pay a Price Premium for Audit Services," Istanbul Management Journal, Istanbul University Business School, vol. 0(88), pages 127-143, June.

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