The association between audit committee and board of director effectiveness and changes in the nonaudit fee ratio

Ho-Young Lee

Applied Financial Economics, 2008, vol. 18, issue 8, 629-638

Abstract: Investors and the US SEC are interested in the impact of nonaudit fees on the economic bonding between auditors and their clients and in the role of audit committees in monitoring this economic bonding. The results of this study show a negative association between audit committee effectiveness and changes in the nonaudit to audit fee ratio, suggesting that effective audit committees generally minimize the nonaudit fee ratio in order to enhance auditor independence. In addition, the results of this study suggest that effective Board of Directors also limit increases in the nonaudit fee ratio, possibly due to their own concerns over auditor independence.

Date: 2008
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DOI: 10.1080/09603100601166887

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