Effect of regulatory oversight on the association between internal governance characteristics and audit fees

El’fred Boo and Divesh Sharma

Accounting and Finance, 2008, vol. 48, issue 1, 51-71

Abstract: We examine the relationship between internal governance, external audit monitoring and regulatory oversight for a sample comprising industrial companies and financial/utility companies subject to additional industry‐specific regulation. Our results indicate that the association between audit fees and board/audit committee independence and size are weaker for regulated companies. These observations are consistent with the notion that regulatory oversight partially substitutes the external audit as a monitoring mechanism. However, boards/audit committees with more multiple directorships demand a more extensive audit in the presence of regulatory oversight to protect their reputation capital. Our study enhances our understanding of the complex relationships among the major corporate governance elements.

Date: 2008
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https://doi.org/10.1111/j.1467-629X.2007.00229.x

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Persistent link: https://EconPapers.repec.org/RePEc:bla:acctfi:v:48:y:2008:i:1:p:51-71

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