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The impact of audit committee effectiveness on audit fees and non-audit service fees

Author

Listed:
  • Muhammad Jahangir Ali
  • Rajbans Kaur Shingara Singh
  • Mahmoud Al-Akra

Abstract

Purpose - The purpose of this study is to examine the impact of audit committee effectiveness on audit fees and non-audit service (NAS) fees in a less regulatory environment. Design/methodology/approach - The authors construct a composite audit committee effectiveness measure incorporating audit committee independence, diligence, size, financial expertise and the chairperson’s accounting expertise. Findings - The authors find that audit committee effectiveness has a positive significant impact on both audit fees and NAS fees. This suggests that effective audit committees can hold auditors accountable resulting in better audit quality and consequently higher audit fees. Originality/value - The link between more effective audit committees with higher NAS purchases can be explained in light of the difference in regulatory requirements providing audit committees with decision rights on the use of NASs, therefore approving more NAS and increasing NASF. Additional tests and robustness analyses confirm the results.

Suggested Citation

  • Muhammad Jahangir Ali & Rajbans Kaur Shingara Singh & Mahmoud Al-Akra, 2018. "The impact of audit committee effectiveness on audit fees and non-audit service fees," Accounting Research Journal, Emerald Group Publishing Limited, vol. 31(2), pages 174-191, July.
    • Handle: RePEc:eme:arjpps:arj-11-2015-0144
    DOI: 10.1108/ARJ-11-2015-0144
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    Citations

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    Cited by:

    1. Puławska Karolina & Dobija Dorota & Piotrowska Katarzyna & Kravchenko Grygorii, 2021. "Audit Committee Formation: The Case of Poland," Journal of Management and Business Administration. Central Europe, Sciendo, vol. 29(2), pages 169-212, June.
    2. George Drogalas & Michail Nerantzidis & Dimitrios Mitskinis & Ioannis Tampakoudis, 2021. "The relationship between audit fees and audit committee characteristics: evidence from the Athens Stock Exchange," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 18(1), pages 24-41, March.
    3. Helmi A. Boshnak, 2021. "The Impact of Audit Committee Characteristics on Audit Quality: Evidence from Saudi Arabia," International Review of Management and Marketing, Econjournals, vol. 11(4), pages 1-12.

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