Director turnover, board monitoring and audit fees: Some Australian evidence

Sutharson Kanapathippillai, Ali Yaftian, Soheila Mirshekary, Heibatollah Sami and Ferdinand A Gul

Pacific-Basin Finance Journal, 2024, vol. 83, issue C

Abstract: This paper explores the association between director turnover and increased audit fees in Australia. The study, aligned with upper echelon theory, reveals that the characteristics and actions of top management, as reflected in director turnover, impact corporate decisions and risk-taking behavior. Specifically, higher director turnover is linked to elevated audit fees, disrupting the stability of top management's monitoring and advisory functions. The association is more pronounced for external turnover compared to internal turnover. Additionally, firms with robust corporate governance quality exhibit a weakened positive relationship between director turnover and audit fees. Notably, the COVID-19 pandemic further amplifies the director turnover/audit fees connection. The findings suggest that auditors are likely to consider and price in the impact of board instability on internal controls and monitoring/advisory functions.

Keywords: Director turnover; Audit fees; Internal controls; Board monitoring; Business risk; Audit risks (search for similar items in EconPapers)
Date: 2024
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Persistent link: https://EconPapers.repec.org/RePEc:eee:pacfin:v:83:y:2024:i:c:s0927538x23003177

DOI: 10.1016/j.pacfin.2023.102246

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