Investors and the US SEC are interested in the impact of nonaudit fees on the economic bonding between auditors and their clients and in the role of audit committees in monitoring this economic bonding. The results of this study show a negative association between audit committee effectiveness and changes in the nonaudit to audit fee ratio, suggesting that effective audit committees generally minimize the nonaudit fee ratio in order to enhance auditor independence. In addition, the results of this study suggest that effective Board of Directors also limit increases in the nonaudit fee ratio, possibly due to their own concerns over auditor independence.
Bibliographical noteFunding Information:
The author thanks V. Mande, B. Kealey, R. Ortman and workshop participants at the University of Nebraska-Omaha for their valuable comments. This study is financially supported in part by Yonsei University.
All Science Journal Classification (ASJC) codes
- Economics and Econometrics