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The impact of audit committee effectiveness on audit fees and non-audit service fees: Evidence from Australia

Muhammad Jahangir Ali (Department of Accounting, La Trobe University, Melbourne, Australia)
Rajbans Kaur Shingara Singh (Department of Accounting, Faculty of Business Accounting and Law, La Trobe University, Bundoora, Australia)
Mahmoud Al-Akra (School of Business, University of Western Sydney, Sydney, Australia)

Accounting Research Journal

ISSN: 1030-9616

Publication date: 2 July 2018

Abstract

Purpose

The purpose of this study is to examine the impact of audit committee effectiveness on audit fees and non-audit service (NAS) fees in a less regulatory environment.

Design/methodology/approach

The authors construct a composite audit committee effectiveness measure incorporating audit committee independence, diligence, size, financial expertise and the chairperson’s accounting expertise.

Findings

The authors find that audit committee effectiveness has a positive significant impact on both audit fees and NAS fees. This suggests that effective audit committees can hold auditors accountable resulting in better audit quality and consequently higher audit fees.

Originality/value

The link between more effective audit committees with higher NAS purchases can be explained in light of the difference in regulatory requirements providing audit committees with decision rights on the use of NASs, therefore approving more NAS and increasing NASF. Additional tests and robustness analyses confirm the results.

Keywords

Acknowledgements

The authors appreciate the helpful comments and suggestions received from participants of the GAOC Conference 2012, Kula Lumpur, Department of Accounting, La Trobe University seminar and the CPA Northern Suburbs Practising Accountants Discussion Group. Any remaining errors are the authors’.

Citation

Ali, M.J., Singh, R.K.S. and Al-Akra, M. (2018), "The impact of audit committee effectiveness on audit fees and non-audit service fees: Evidence from Australia", Accounting Research Journal, Vol. 31 No. 2, pp. 174-191. https://doi.org/10.1108/ARJ-11-2015-0144

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Publisher

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Emerald Publishing Limited

Copyright © 2018, Emerald Publishing Limited

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