The effect of directors’ and officers’ insurance on audit fees: the case of an emerging economy
Abstract
Purpose
The purpose of this paper is to examine the role of D&O insurance in audit pricing in Taiwan, an emerging market in which auditors face negligible litigation risk and intense competition.
Design/methodology/approach
It examines the association between audit fees and D&O insurance coverage.
Findings
Results indicate that audit fees are higher for clients with higher D&O coverage after controlling for other determinants. Further analysis shows that auditors charge additional audit fees for clients whose insurer is foreign owned.
Originality/value
Overall, the study provides evidence that the induction of financial misstatement risks by D&O insurance is one of the contributing audit risk factors in an emerging economy context.
Keywords
Citation
Li, K.-F. and Liao, Y.-P. (2017), "The effect of directors’ and officers’ insurance on audit fees: the case of an emerging economy", Asian Review of Accounting, Vol. 25 No. 2, pp. 174-190. https://doi.org/10.1108/ARA-04-2016-0045
Publisher
:Emerald Publishing Limited
Copyright © 2017, Emerald Publishing Limited