CFO Compensation and Audit Fees

Jing Jiang (), Charles T. Fagan and Linda Hughen
Additional contact information
Jing Jiang: Department of Economics and Finance, Jack Welch College of Business and Technology, Sacred Heart University, Fairfield, CT 06825, USA
Charles T. Fagan: Department of Economics and Finance, Jack Welch College of Business and Technology, Sacred Heart University, Fairfield, CT 06825, USA
Linda Hughen: Department of Accounting, Jack Welch College of Business and Technology, Sacred Heart University, Fairfield, CT 06825, USA

JRFM, 2024, vol. 17, issue 11, 1-19

Abstract: Executive compensation contracts may influence financial reporting quality, and the CFO plays a key role in preparing the financial statements. This study examines whether the structure and components of CFO compensation are associated with audit risk as measured by audit fees for a sample of S&P 1500 companies during the period 2012–2022. We find that the percentage of total compensation composed of either stock or options is significant and positively related to audit fees, while non-equity incentive plan compensation is significant and negatively related to audit fees. We also find that the dollar amount of equity compensation is significant and positively related to audit fees, while the dollar amount of non-equity compensation is not related to audit fees. These results suggest that CFO compensation structure is an important factor in the assessment of audit risk, which is important for compensation committees as well as regulators. This is the first study, to our knowledge, that examines the relationship between the dollar amount and composition of CFO compensation and audit fees.

Keywords: CFO compensation; equity-based compensation; equity incentives; audit fees (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://www.mdpi.com/1911-8074/17/11/476/pdf (application/pdf)
https://www.mdpi.com/1911-8074/17/11/476/ (text/html)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:gam:jjrfmx:v:17:y:2024:i:11:p:476-:d:1504068

Access Statistics for this article

JRFM is currently edited by Ms. Chelthy Cheng

More articles in JRFM from MDPI
Bibliographic data for series maintained by MDPI Indexing Manager ().