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Audit fees and IFRS accounting - Is information costly?

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Author Info

  • Friis, Ole

    ()
    (Department of Business and Economics)

  • Nielsen, Mogens

    ()
    (Department of Business and Economics)

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    Abstract

    Since 2005 companies with equity instruments traded on regulated markets in the European Economic Area have prepared their financial reports in accordance with accounting standards issued by the IASB. A survey conducted in 2007 indicated that most of the EU companies that changed from local to IFRS rules incurred additional costs in connection with the transition. Also, companies expected additional future costs from using IFRS. Although the main part of these stemmed from the companies’ internal work on IFRS statements, additional costs for external auditing and other external services were identified as substantial but independent of company size. We analyze whether the application of IFRS standards has increased Danish companies’ cost of auditing. Our study is based on a sample of financial reports from large Danish companies from 2002 to 2008. Controlling for a number of general audit fee driving aspects, we find that overall, audit fees have not increased significantly for companies using IFRS rules. However, when combining IFRS with company size and complexity, we find that large and complex companies using IFRS pay a heavy audit fee premium compared to small and less complex companies that also use IFRS. Our results for nonaudit fees are less conclusive.

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    File URL: http://static.sdu.dk/mediafiles//3/3/3/%7B33328229-2B98-44A1-81B9-7E1F43DC1A8E%7Ddpbe3_2010.pdf
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    Bibliographic Info

    Paper provided by Department of Business and Economics, University of Southern Denmark in its series Discussion Papers of Business and Economics with number 3/2010.

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    Length: 35 pages
    Date of creation: 03 Sep 2010
    Date of revision:
    Handle: RePEc:hhs:sdueko:2010_003

    Contact details of provider:
    Postal: Department of Business and Economics, University of Southern Denmark, Campusvej 55, DK-5230 Odense M, Denmark
    Phone: 65 50 32 33
    Fax: 65 50 32 37
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    Web page: http://www.sdu.dk/ivoe
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    Related research

    Keywords: Audit fees; non audit fees; IFRS; transition of accounting regime; empirical study;

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