Audit Committee Characteristics and Fee Discounting for Initial Audit Engagements

• Main Authors: Yi-ChengTsai, 蔡煜程
• Other Authors: Hua-Wei Huang
• Format: Others
• Language: en_US
• Published: 2018
• Online Access: http://ndltd.ncl.edu.tw/handle/9372m3

碩士 === 國立成功大學 === 會計學系 === 106 === This paper examines whether fee discounting for initial audit engagements still exists in Taiwan and how characteristics of audit committees smooth down effects of low-balling. As a result of high passing rate in obtaining accountant licenses and the policy of cancelling the audit fee floor, it has been popular that accountants tend to adopt strategies of low-balling for establishing the long-term relationship with clients in Taiwan for a long time. However, they may neglect required works or reach a compromise with the management if they don’t charge sufficient fees. Therefore, it can lead to issues of impairing independences and audit quality. On the other hand, audit committees play key roles in maintaining the corporate governance. Their works involve the selection and compensation of accountants as well. If audit committees are more effective, they should be devoted to achieving goals of overseeing quality of financial reporting or internal control more likely. As a result, they may decide a higher level of audit fees because they also rely on external auditors’ assistance. The sample comprises all publicly-traded companies ranging between 2003 and 2016 in Taiwan Stock Exchange. Running regressions with different types of changes, we find that fee discounting for initial audit engagements still exists in Taiwan so far. Consistent with the hypothesis, we also prove the relations that effects of fee discounting will be smoothed down if the ratio of expertise in finance or accounting is high in audit committees. However, this finding is certified only in the group of high audit fees. As expected, we find evidence in the association between characteristics of audit committees and effects of fee discounting.