CEO and CFO Equity Incentives and the Pricing of Audit Services-Reference-Cited by-同舟云学术

CEO and CFO Equity Incentives and the Pricing of Audit Services

Published:2013-11-01 Issue:2 Volume:33 Page:1-25
ISSN:1558-7991
Container-title:AUDITING: A Journal of Practice & Theory
language:en
Short-container-title:

Author:

Billings B. Anthony¹,Gao Xinghua¹,Jia Yonghong¹

Affiliation:

1. B. Anthony Billings is a Professor at Wayne State University; Xinghua Gao and Yonghong Jia are Assistant Professors, both at Governors State University.

Abstract

SUMMARY: The alleged perverse role of managerial incentives in accounting scandals, and the distinctive role of auditors in identifying and intervening in attempted earnings manipulation, highlight the importance of explicitly considering executive incentive plans by auditors in the auditing process. By empirically testing auditors' responses to CEO/CFO equity incentives in planning and pricing decisions using data from 2002 through 2009, we document compelling evidence that CFO equity incentives are positively associated with audit fees and CEO equity incentives are not statistically related to audit fees, suggesting that auditors perceive heightened audit risk associated with CFO equity incentives. Our further analyses reveal that the positive association between CFO equity incentives and audit fees is more pronounced in firms with weak internal controls, indicating heightened risk associated with CFO equity incentives in this setting perceived by auditors. JEL Classifications: G30, G34, M42, M52.

Publisher

American Accounting Association

Subject

Economics and Econometrics,Finance,Accounting

Link

http://meridian.allenpress.com/ajpt/article-pdf/33/2/1/1602580/ajpt-50650.pdf

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