Additional Evidence on the Relationship Between an Internal Audit Function and External Audit Fees in Australia
MetadataShow full item record
Studies examining the relationship between a firm's internal audit (IA) function and its audit fees have produced mixed results with suggestions of possible model mis-specification in these studies. Our analysis reveals that differences in significance for IA with audit fees is driven by the choice of variables proxying for firm size and other firm characteristics, suggesting that prior results are entangled with model specification issues. Specifically, when the sales variable is used as a measure of firm size, IA is insignificant (in explaining variations in audit fees) but subsequently becomes significant when assets and employees are used. To overcome the conflicting results, subsequent factor analysis supported a positive relationship between IA and audit fees. The most significant implication from this study is that previously reported relationships involving audit fees may be the outcome of the model adopted rather than the underlying relationship between the variable of interest and audit fees.
Showing items related by title, author, creator and subject.
Rusmin, Rusmin; Evans, John (2017)Purpose: The purpose of this paper is to empirically examine the relation between two dimensions of auditor quality, namely, auditor industry specialization and auditor reputation and the audit report lag. Design/method ...
Habib, A.; Gong, R.; Hossain, Mahmud (2013)Purpose – The purpose of this research note is to examine the association between overvalued equities and audit fees in the USA. Design/methodology/approach – The paper employs a standard audit fee regression model ...
Abdul Wahab, Effiezal Aswadi; Zain, M.; James, K. (2011)Purpose – The purpose of this paper is to examine the relationship between political connection,corporate governance and audit fees in Malaysia. Specifically, it is argued that politically connectedfirms are perceived to ...