Risk Management Committee, Auditor Choice and Audit Fees

Iman Harymawan, Aditya Aji Prabhawa, Mohammad Nasih and Fajar Kristanto Gautama Putra
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Iman Harymawan: Department of Accounting, Faculty of Economic and Business, Universitas Airlangga, Surabaya 60115, Jawa Timur, Indonesia
Aditya Aji Prabhawa: Department of Accounting, Faculty of Economic and Business, Universitas Airlangga, Surabaya 60115, Jawa Timur, Indonesia
Mohammad Nasih: Department of Accounting, Faculty of Economic and Business, Universitas Airlangga, Surabaya 60115, Jawa Timur, Indonesia
Fajar Kristanto Gautama Putra: Department of Accounting, Faculty of Economic and Business, Universitas Airlangga, Surabaya 60115, Jawa Timur, Indonesia

Risks, 2021, vol. 9, issue 9, 1-16

Abstract: We find that risk management committees and BIG4 audit firms contribute to audit fees. We use observations of 895 companies registered in Indonesia for 2014–2018, and to answer our hypothesis we used ordinary least squares analysis. The results show that BIG4 weakens the relationship between RMC and audit fees. Our study proves that higher demand for audit coverage will occur if there is a risk management committee within the company. As a result, audit fees increase. RMC may demand high-quality external guarantees, but the presence of BIG4 as a moderating variable reduces the relationship between the two variables. We assume that this can happen because auditors can work more efficiently if the company has an RMC, auditor(s) could indirectly reduce the risk because it is partially results from the performance of the RMC. In addition, we also use the robustness test to handle the endogeneity problem with consistent results as OLS. These findings provide evidence for policy makers about the relationship between audit fees and risk management committees.

Keywords: risk management committee; Big 4; audit fee (search for similar items in EconPapers)
JEL-codes: C G0 G1 G2 G3 K2 M2 M4 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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