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The effect of directors’ and officers’ insurance on audit fees: the case of an emerging economy

Author

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  • Kuei-Fu Li
  • Yi-Ping Liao

Abstract

Purpose - The purpose of this paper is to examine the role of D&O insurance in audit pricing in Taiwan, an emerging market in which auditors face negligible litigation risk and intense competition. Design/methodology/approach - It examines the association between audit fees and D&O insurance coverage. Findings - Results indicate that audit fees are higher for clients with higher D&O coverage after controlling for other determinants. Further analysis shows that auditors charge additional audit fees for clients whose insurer is foreign owned. Originality/value - Overall, the study provides evidence that the induction of financial misstatement risks by D&O insurance is one of the contributing audit risk factors in an emerging economy context.

Suggested Citation

  • Kuei-Fu Li & Yi-Ping Liao, 2017. "The effect of directors’ and officers’ insurance on audit fees: the case of an emerging economy," Asian Review of Accounting, Emerald Group Publishing Limited, vol. 25(2), pages 174-190, May.
    • Handle: RePEc:eme:arapps:ara-04-2016-0045
    DOI: 10.1108/ARA-04-2016-0045
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