Executive tournament incentives and audit fees

David B. Bryan and Terry W. Mason

Advances in accounting, 2017, vol. 37, issue C, 30-45

Abstract: This study investigates whether the incentives for non-CEO executives to become the next CEO, commonly known as “tournament incentives,” influence auditor perceptions of risk. We argue that auditors are likely to view tournament incentives as affecting the risk of a material misstatement as well as the risk of litigation arising against the auditor, leading to an impact on audit fees. Using three alternative measures of tournament incentives from prior literature, we provide consistent evidence that stronger tournament incentives are associated with higher audit fees. We also find that the relation between tournament incentives and audit fees is moderated by insider CEO succession, CEO tenure, CEO age, auditor tenure, and abnormal accruals.

Keywords: Tournament incentives; Audit fees; Audit risk; Auditor business risk (search for similar items in EconPapers)
Date: 2017
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (5)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:advacc:v:37:y:2017:i:c:p:30-45

DOI: 10.1016/j.adiac.2016.12.001

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