Articlegreen2013

Audit Fees and IAS / IFRS Adoption: Evidence from the Banking Industry

43 citations0/0 files storedInternational Journal of Auditing

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Auditing, Earnings Management, Governance Accounting Theory and Financial Reporting Corporate Governance and Financial Management

Abstract

The adoption of International Accounting Standards/International Financial Reporting Standards (IAS/IFRS) has two opposite effects on audit fees: on the one hand, greater effort is required from auditors, which is likely to be reflected by higher fees; on the other hand, if IAS/IFRS improve the quality of financial reporting, expected liability costs could decrease and lower fees may be demanded. We consider a large sample of Italian banks and we examine the effect of IAS/IFRS adoption on audit fees. The results show that higher fees (19.29 per cent in real terms) are paid after the switch to the new standards. Using a standard earnings management model, we do not find support for the idea that financial reporting quality is affected by the adoption of IAS/IFRS. The observed increase in fees is positively associated with the presence of financial derivatives held for hedging purposes. This paper extends the findings of prior research on the effect of IAS/IFRS adoption on audit fees; contrary to prior contributions, our analysis concentrates on the banking industry. Furthermore, unlike prior works, we consider both listed and non‐listed firms.

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References

2008International Accounting Standards and Accounting Quality 1980The Pricing of Audit Services: Theory and Evidence 2006Audit Fees: A Meta‐analysis of the Effect of Supply and Demand Attributes*2002The Relation between Auditors' Fees for Nonaudit Services and Earnings Management 2003Do Nonaudit Services Compromise Auditor Independence? Further Evidence 2002Rating Banks: Risk and Uncertainty in an Opaque Industry 2009National and Office‐Specific Measures of Auditor Industry Expertise and Effects on Audit Quality 2004Fees Paid to Audit Firms, Accrual Choices, and Corporate Governance

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2020Accounting Regulations and IFRS Adoption in Francophone North African Countries: The Experience of Algeria, Morocco, and Tunisia 2022Financial reporting quality of financial institutions: Literature review 2019The effects of IFRS adoption and firm size on audit fees in financial institutions in Ghana 2016The Impact of Fair Value Measurement on Audit Fees: Evidence from Financial Institutions in 24 European Countries 2019On accounting’s twenty-first century challenge: evidence on the relation between intangible assets and audit fees

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