Fair value accounting for non-current assets and audit fees: Evidence from Australian companies

Yao, Dai Fei (Troy), Majella Percy and Fang Hu

Journal of Contemporary Accounting and Economics, 2015, vol. 11, issue 1, 31-45

Abstract: We investigate the association between asset revaluations of non-current assets and audit fees, using a sample of ASX 300 companies from the years 2003–2007. We report that there is a significant increase in the audit fees paid when non-financial assets (PPEs, investment properties and intangible assets) are measured at fair values. Moreover, we provide evidence that an independent valuer or appraiser significantly weakens the positive association between asset revaluations and audit fees. Furthermore, companies whose non-current assets are revalued upwards and those that revalue their non-current assets upwards every year have significantly higher audit fees. Additional tests provide empirical evidence that the strength of corporate governance has a moderating effect on the level of audit fees. This study contributes to the ongoing debate on the role of fair value accounting. The findings suggest agency costs associated with fair value estimates may offset the benefits from the use of fair value accounting.

Keywords: Asset revaluations; Audit fees; Corporate governance (search for similar items in EconPapers)
JEL-codes: M41 M42 M48 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (7)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:jocaae:v:11:y:2015:i:1:p:31-45

DOI: 10.1016/j.jcae.2014.12.003

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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

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