The effect of directors’ and officers’ insurance on audit fees: the case of an emerging economy

Kuei-Fu Li and Yi-Ping Liao

Asian Review of Accounting, 2017, vol. 25, issue 2, 174-190

Abstract: Purpose - The purpose of this paper is to examine the role of D&O insurance in audit pricing in Taiwan, an emerging market in which auditors face negligible litigation risk and intense competition. Design/methodology/approach - It examines the association between audit fees and D&O insurance coverage. Findings - Results indicate that audit fees are higher for clients with higher D&O coverage after controlling for other determinants. Further analysis shows that auditors charge additional audit fees for clients whose insurer is foreign owned. Originality/value - Overall, the study provides evidence that the induction of financial misstatement risks by D&O insurance is one of the contributing audit risk factors in an emerging economy context.

Keywords: Audit fees; Directors’ and officers’ (D&O) insurance (search for similar items in EconPapers)
Date: 2017
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Persistent link: https://EconPapers.repec.org/RePEc:eme:arapps:ara-04-2016-0045

DOI: 10.1108/ARA-04-2016-0045

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