What is the impact of corruption on audit fees?

Muhammad Nurul Houqe, Tony van Zijl, A. K. M. Waresul Karim and Andrew Mahoney

Public Money & Management, 2019, vol. 39, issue 2, 123-131

Abstract: This study examines the impact of country-level corruption on audit fees. Using a sample of 102,934 companies from 48 countries over the period 1998–2014, the authors find that audit fees are positively associated with higher levels of corruption. They also discovered that corruption adds a significant margin to the premium paid to Big 4 (Deloitte Touche Tohmatsu, PricewaterhouseCoopers, Ernst & Young and KPMG) auditors. The study opens up a new line of research and adds significantly to the academic literature on the Big 4 audit premium.IMPACTThe study has several important implications for academics and policy-makers. These include discussion of the factors driving corruption and the role of auditing. Knowledge of the factors driving corruption should guide policy-makers to adoption of polices that could reduce corruption. The finding that audit fees are positively associated with corruption, as well as with audit quality, points to the potential for auditing as a tool for corruption control beyond its traditional role as an assurance service.

Date: 2019
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DOI: 10.1080/09540962.2019.1580912

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