 Do corporate pension plans affect audit pricing?Yangyang Chen, Rui Ge and Leon Zolotoy Journal of Contemporary Accounting and Economics, 2017, vol. 13, issue 3, 322-337 Abstract: We examine whether corporate pension plans of client firms (hereafter, clients) influence auditors’ decisions on audit pricing for the clients in the U.S. We find that, on average, auditors charge higher fees for auditing financial statements of client firms sponsoring defined benefits (DB) pension plans than matched firms without DB pension plans. Moreover, we find that the effect of DB pension plans on audit fees is stronger when clients’ earnings are more sensitive to DB pension estimates, or when managers’ compensation induces more risk taking. Finally, we find that the additional audit fees charged for clients with DB pension plans are negatively associated with the extent of manipulations of DB pension accounting estimates. Collectively, our findings suggest that auditors consider managers’ incentive to manipulate earnings and increase audit effort to reduce audit risk associated with DB pension accounting, which results in higher audit fees. Keywords: Pension plans; Audit pricing; Audit effort; Audit risk; Earnings management (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jocaae:v:13:y:2017:i:3:p:322-337 DOI: 10.1016/j.jcae.2017.10.002 Access Statistics for this article Journal of Contemporary Accounting and Economics is currently edited by Agnes C.S. Cheng, P. Clarkson, F.A. Gul, Zoltan Matolcsy, Dan Simunic and Ben Srinidhi More articles in Journal of Contemporary Accounting and Economics from Elsevier |
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