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Interdependencies between Elements of Governance and Auditing : Evidence from Germany

Listed author(s):
  • Bremert, Michael
  • Voeller, Dennis
  • Zein, Nicole
Registered author(s):

    This study is the first to examine empirically the relation between audit fees, client and governance attributes in Germany. Auditing is an essential element in the system of corporate governance. Further elements include internal control institutions and management compensation. All these elements of corporate governance are designed to reduce agency problems and information asymmetries. Therefore, interdependencies between these instruments are likely to exist. This study differs from existing research on the association between audit fees and governance institutions as it explicitly considers the German governance regime with its two-tier board system. Using data from German stock market companies, we examine whether governance elements complement or substitute the monitoring role of auditing. After adjustments for size effects, the regression results suggest that the ratio of bonus to total payments as well as the existence of an audit committee significantly lower audit fees.

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    File URL: https://ub-madoc.bib.uni-mannheim.de/2324/1/dp07_76.pdf
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    Paper provided by Sonderforschungsbreich 504 in its series Papers with number 07-76.

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    Date of creation: 2007
    Handle: RePEc:mnh:spaper:2324
    Contact details of provider: Postal:
    D-68131 Mannheim

    Phone: (49) (0) 621-292-2547
    Fax: (49) (0) 621-292-5594
    Web page: https://ub-madoc.bib.uni-mannheim.de/view/ubmaseries/90080.html
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    1. David F. Larcker & Scott A. Richardson, 2004. "Fees Paid to Audit Firms, Accrual Choices, and Corporate Governance," Journal of Accounting Research, Wiley Blackwell, vol. 42(3), pages 625-658, June.
    2. Mark A. Clatworthy & Michael J. Peel, 2007. "The Effect of Corporate Status on External Audit Fees: Evidence From the UK," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 34(1-2), pages 169-201.
    3. Santanu Mitra & Mahmud Hossain & Donald Deis, 2007. "The empirical relationship between ownership characteristics and audit fees," Review of Quantitative Finance and Accounting, Springer, vol. 28(3), pages 257-285, April.
    4. Jensen, Michael C. & Meckling, William H., 1976. "Theory of the firm: Managerial behavior, agency costs and ownership structure," Journal of Financial Economics, Elsevier, vol. 3(4), pages 305-360, October.
    5. Craswell, Allen T. & Francis, Jere R. & Taylor, Stephen L., 1995. "Auditor brand name reputations and industry specializations," Journal of Accounting and Economics, Elsevier, vol. 20(3), pages 297-322, December.
    6. Holthausen, Robert W. & Larcker, David F. & Sloan, Richard G., 1995. "Annual bonus schemes and the manipulation of earnings," Journal of Accounting and Economics, Elsevier, vol. 19(1), pages 29-74, February.
    7. Yi Meng Chen & Robyn Moroney & Keith Houghton, 2005. "Audit committee composition and the use of an industry specialist audit firm," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 45(2), pages 217-239.
    8. Francis, Jere R., 1984. "The effect of audit firm size on audit prices : A study of the Australian Market," Journal of Accounting and Economics, Elsevier, vol. 6(2), pages 133-151, August.
    9. Michael Firth, 1997. "The Provision of Non-audit Services and the Pricing of Audit Fees," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 24(3), pages 511-525.
    10. repec:bla:joares:v:22:y:1984:i:2:p:679-702 is not listed on IDEAS
    11. W. Robert Knechel & Marleen Willekens, 2006. "The Role of Risk Management and Governance in Determining Audit Demand," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 33(9-10), pages 1344-1367.
    12. Healy, Paul M., 1985. "The effect of bonus schemes on accounting decisions," Journal of Accounting and Economics, Elsevier, vol. 7(1-3), pages 85-107, April.
    13. Sankar De & Pradyot K. Sen, 2002. "Legal Liabilities, Audit Accuracy and the Market for Audit Services," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 29(3&4), pages 353-410.
    14. Burgstahler, David & Dichev, Ilia, 1997. "Earnings management to avoid earnings decreases and losses," Journal of Accounting and Economics, Elsevier, vol. 24(1), pages 99-126, December.
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