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Article
Publication date: 6 February 2024

Mawih Kareem Al Ani, Faris ALshubiri and Habiba Al-Shaer

This study aims to examine whether firms that appear to exhibit high sustainable outputs are more likely to pay higher audit fees than firms without such outputs.

Abstract

Purpose

This study aims to examine whether firms that appear to exhibit high sustainable outputs are more likely to pay higher audit fees than firms without such outputs.

Design/methodology/approach

The sustainability outputs are measured using a sustainable product portfolio consisting of four products: clean energy products, eco-design products (EDP), environmental products (EP) and sustainable building projects (SBP). The audit fee variable is measured by the natural logarithm of the total amount of audit fees. The study tests two models of the association between these outputs and audit fees; Model 1 tests this association in the absence of the moderating variable (sustainability committee), and Model 2 tests the association in the presence of the moderating variable.

Findings

An analysis of data on 261 European firms from the Refinitiv Eikon database from 2010 to 2019 shows that high sustainability outputs are significantly and positively associated with audit fees. More importantly, this association is moderated by the presence of a board-level sustainability committee, suggesting that this type of committee reflects a factor considered by auditors in their audit risk assessment practices. The findings indicate that in Model 1, one (EP) out of four variables has a significant and positive association with audit fees, while in Model 2 and in the presence of sustainability committee, two variables (EP and EDP) have a significant and negative association with audit fees. However, the robust analysis shows that three variables (EP, EDP and SBP) have significant and negative associations with audit fees.

Practical implications

The study findings have important implications for policymakers, auditors and firms’ managers. For policymakers, the findings provide support for the argument that sustainable attitudes incentivise firms to manage sustainable product profiles more effectively. As such, policymakers should incentivise firms to establish a sustainability committee and regulate its role and responsibilities. Auditors should coordinate with the sustainability committee to facilitate audit efforts and reduce audit fees.

Social implications

Understanding the relationship between sustainable products and audit fees will allow firms to improve their portfolio of sustainable products. In addition, other social implications of this study relate to improving relationships with society by establishing a sustainability committee that is responsible to communicate with that society.

Originality/value

The results support the argument that firms should manage sustainable product portfolios more effectively. In addition, the results of the study highlight the importance of a new variable as a moderator, the sustainability committee, which has not been examined before.

Details

Sustainability Accounting, Management and Policy Journal, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2040-8021

Keywords

Article
Publication date: 30 January 2024

Abbas Ali Daryaei, Afshin Balani and Yasin Fattahi

The literature on the influence of audit committees (AC) and cosmetic accounting (CA) is scarce. AC plays a unique and vital role in boosting earnings reliability in countries…

Abstract

Purpose

The literature on the influence of audit committees (AC) and cosmetic accounting (CA) is scarce. AC plays a unique and vital role in boosting earnings reliability in countries with weaker application of accounting standards or weaker legal protection for investors. AC, therefore, are considered to be one of the essential tools available to directors in supervising management decisions regarding financial reporting. This paper aims to examine the influence of AC characteristics (ACC) on CA and how this relationship is moderated by the audit fee.

Design/methodology/approach

This study used probit regression to analyze 1,218 firm-year observations of listed companies in Tehran Stock Exchange from 2014 to 2020.

Findings

The results show that AC financial accounting expertise, AC independence, female AC membership and AC tenure were negatively related to CA. The negative relationship is highly pronounced when a firm incurs higher audit fees, and audit fees moderate the relationship between ACC and CA. Results for the robustness checks show that only AC independence was significant, and the results of other characteristics were not significant.

Research limitations/implications

This research was conducted in an Iranian setting where the formation of ACs is on the verge of regulation; therefore, the data used for the study only contains the seven-year period of ACs’ statutory activity. In addition, a lack of consensus on the precise measures of an AC’s effectiveness could be considered as a restrictive factor.

Originality/value

The findings provide an initial insight into the effect AC on CA and moderating effect of audit fee on the relationship between ACC and CA.

Details

Corporate Governance: The International Journal of Business in Society, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1472-0701

Keywords

Article
Publication date: 23 January 2024

Md Jahidur Rahman, Hongtao Zhu, Yiling Zhang and Md Moazzem Hossain

This study aims to investigate whether gender diversity in audit committees affects the purchase of nonaudit services in China. Results from family and nonfamily firms are…

Abstract

Purpose

This study aims to investigate whether gender diversity in audit committees affects the purchase of nonaudit services in China. Results from family and nonfamily firms are compared and the critical mass participation of females are further examined.

Design/methodology/approach

The sample comprises 1,834 Chinese listed companies from 2012 to 2021, among which 910 are family firms. The Heckman (1979) two-stage model is used to mitigate the potential endogeneity issue in the selection of gender diversity. Propensity score matching is also used to further alleviate the endogeneity problem in relation to family firms.

Findings

Results show a significant and negative correlation between the gender diversity in audit committees and nonaudit service fees. This association is more apparent in nonfamily than in family firms. Findings are consistent and robust to endogeneity tests and sensitivity analyses. The analysis of critical mass and symbolic participation shows that three female directors can more significantly restrain nonaudit fees than one to two females on the board.

Practical implications

This study contributes to literature on resource dependence theory, which posits that audit committees help enterprises establish contact with auditors, improve the company legitimacy, assist in communication and provide relevant expertise. This study also relates to agency theory, which holds that differences in the severity of types I and II agency problems between family and nonfamily firms lead to differences in auditor selection and related costs.

Originality/value

Extending from previous research on the relation between the gender diversity in audit committees and nonaudit fees, the present study delves into this connection within the context of China, an emerging economy. As a result, this investigation offers novel insights and expands upon current knowledge. In addition, the correlation between the gender diversity of audit committees and nonaudit fees is explored for family and nonfamily firms.

Details

Meditari Accountancy Research, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 2049-372X

Keywords

Article
Publication date: 13 June 2008

Faten Sabry and Winai Wongsurawat

The purpose of this paper is to describe data assembled on all registered US investment companies on advisory fees using the NSAR filings and to analyze the impact of the…

Abstract

Purpose

The purpose of this paper is to describe data assembled on all registered US investment companies on advisory fees using the NSAR filings and to analyze the impact of the structure of the advisory contracts on the fees paid to mutual funds advisors. This analysis is particularly relevant now that mutual funds have to explain the rationale for the choice of the advisory fees in their public filings.

Design/methodology/approach

The paper summarizes data on advisory fees in the NSAR filings and uses regression analysis to examine the determinants of advisory fees.

Findings

The paper summarizes salient features of the mutual fund advisory fee contracts using the NSAR database. The analysis shows that breakpoint fee schedules designed to generate savings, do not automatically translate into lower expenses for the investors.

Practical implications

When determining the renewal of an advisory contract, the board of trustees of a mutual fund will then need to assess myriad factors related to the costs and profits of the fund, including the nature of the fee schedule. Regression models provide objective measures of assessing the reasonableness of advisory fees.

Originality/value

This paper contributes to the ongoing debate on the evaluation of mutual funds advisory fees and highlights the usefulness of the NSAR filings. The debate is especially relevant given the additional SEC disclosure requirements.

Details

Journal of Investment Compliance, vol. 9 no. 2
Type: Research Article
ISSN: 1528-5812

Keywords

Article
Publication date: 1 January 1990

Pete Giacoma

User fees are charges levied against individual consumers of publicly produced services and commodities and publicly granted privileges on a cost‐per‐unit basis. In the broadest…

Abstract

User fees are charges levied against individual consumers of publicly produced services and commodities and publicly granted privileges on a cost‐per‐unit basis. In the broadest definition, user fees include charges for specialized database searches performed by public libraries, for electricity produced by a city‐owned utility, and for liquor licenses. In each of these cases, an individual can avoid the charge by consuming zero amount of the service, commodity, or privilege. By comparison, an individual cannot avoid the general taxes assessed for support of the library or other government services even if his or her direct consumption of a given service is zero.

Details

The Bottom Line, vol. 3 no. 1
Type: Research Article
ISSN: 0888-045X

Article
Publication date: 1 February 2000

JOHN G. PERRY and MARTIN BARNES

Target cost contracts are growing in popularity but concerns remain about the interplay between fee, target, sharing ratios and the final price. This paper offers a fundamental…

Abstract

Target cost contracts are growing in popularity but concerns remain about the interplay between fee, target, sharing ratios and the final price. This paper offers a fundamental analysis of the principles under‐pinning target contracts. It shows that there is scope for manipulation of tenders and that suboptimal methods of tender evaluation are in use. The paper analyses both fixed fee and percentage fee contracts. Methods of tender evaluation are proposed that will both reduce the scope for manipulation by tenderers and increase the likelihood of the contract being awarded to the tenderer whose final price will be the lowest. The analysis reveals a strong case for setting the contractor's share of cost overrun or underrun at a value that is not less than 50%. Finally, the paper proposes two simplifications that would reduce the number of variables in target cost contracts of the future. One is for the employer to set the fee and the other requires only that a target be tendered but with the fee built into it.

Details

Engineering, Construction and Architectural Management, vol. 7 no. 2
Type: Research Article
ISSN: 0969-9988

Keywords

Article
Publication date: 1 February 1976

ROSS I. HARROLD

This article considers the use of charging differential fees for the same tuition services as a means to widen the financial accessibility of non‐government schools to children of…

Abstract

This article considers the use of charging differential fees for the same tuition services as a means to widen the financial accessibility of non‐government schools to children of less affluent parents in Australia. After discussing theoretical aspects, the author considers how the theoretical concepts could be operationalized, then how a sliding scale fee schedule could be implemented without, and with, external financial assistance.

Details

Journal of Educational Administration, vol. 14 no. 2
Type: Research Article
ISSN: 0957-8234

Article
Publication date: 25 December 2023

Kaleemullah Abbasi, Ashraful Alam, Noor Ahmed Brohi and Shahzad Nasim

This study aims to examine the association between non-audit fees and audit quality by using the context of gender-diverse audit committees. Further, the authors assess whether…

Abstract

Purpose

This study aims to examine the association between non-audit fees and audit quality by using the context of gender-diverse audit committees. Further, the authors assess whether this link is moderated by industry-specialist auditors.

Design/methodology/approach

This study used non-financial FTSE-350 firms over the period of seven years. In addition, the authors use ordinary least squares regression to test the research hypotheses.

Findings

The authors find that female directors on audit committees are negatively related to non-audit fees, suggesting that non-audit fees reduce audit quality. Moreover, the results indicate that industry-specialist auditors positively moderate the link between gender-diverse audit committees and non-audit fees. This suggests that non-audit fees improve audit quality when the auditor is an industry-specialist.

Practical implications

The study does not support blanket restrictions on non-audit fees. It recommends regulators to consider industry expertise of auditors when devising non-audit fee restrictions. Moreover, the findings of this study have implications for firms aiming to understand whether non-audit fees could be used for enhancing audit quality.

Originality/value

By using the context of female directors on audit committees, the authors conclusively assess the link between non-audit fees and audit quality. Further, this study provides a more robust evidence on whether industry-specialist auditors affect the relationship between non-audit fees and audit quality.

Details

Journal of Financial Reporting and Accounting, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 1985-2517

Keywords

Article
Publication date: 27 February 2014

Daniel A. Nathan and Lauren A. Navarro

– To explain the SEC's focus on the appropriate use of fee-based accounts and disciplinary efforts to identify and prevent “reverse churning.”

Abstract

Purpose

To explain the SEC's focus on the appropriate use of fee-based accounts and disciplinary efforts to identify and prevent “reverse churning.”

Design/methodology/approach

Describes the quantitative analytics used in the SEC's Risk Analysis Examinations (RAEs) to identify reverse churning and other problematic behaviors, explains why the inappropriate use of fee-based or “wrap fee” accounts and “double charging” can be unfair to investment clients, summarizes prior NASD and FINRA guidance and enforcement regarding fee-based account supervision, and recommends account monitoring actions that firms should take to ferret out reverse churning.

Findings

The SEC's continuing interest in reverse churning and double-charging, and its use of new examination and investigation tools, together suggest that the future will see more investigations and enforcement actions against firms who place clients in a fee-based or “wrap-fee” account without having adequate supervisory procedures to determine and monitor whether such accounts are appropriate for those clients.

Practical implications

Monitoring accounts to ferret out reverse churning has proven difficult for firms in the past, since spotting inactivity might be more challenging than detecting excessive trades (known as “churning”). However, it seems that the SEC and its staff are enhancing their ability to identify and address these violations.

Originality/value

Practical advice from experienced financial services lawyers.

Details

Journal of Investment Compliance, vol. 15 no. 1
Type: Research Article
ISSN: 1528-5812

Keywords

Article
Publication date: 6 November 2018

Robert Van Grover

To summarize and interpret a Risk Alert issued on April 12, 2018 by the US SEC’s Office of Compliance Inspections and Examinations (OCIE) on the most frequent advisory fee and…

Abstract

Purpose

To summarize and interpret a Risk Alert issued on April 12, 2018 by the US SEC’s Office of Compliance Inspections and Examinations (OCIE) on the most frequent advisory fee and expense compliance issues identified in recent examinations of investment advisers.

Design/methodology/approach

Summarizes deficiencies identified by the OCIE staff pertaining to advisory fees and expenses in the following categories: fee billing based on incorrect account valuations, billing fees in advance or with improper frequency, applying incorrect fee rates, omitting rebates and applying discounts incorrectly, disclosure issues involving advisory fees, and adviser expense misallocations.

Findings

In the Risk Alert, OCIE staff emphasized the importance of disclosures regarding advisory fees and expenses to the ability of clients to make informed decisions, including whether or not to engage or retain an adviser.

Practical implications

In light of the issues identified in the Risk Alert, advisers should assess the accuracy of disclosures and adequacy of policies and procedures regarding advisory fee billing and expenses. As a matter of best practice, advisers should implement periodic forensic reviews of billing practices to identify and correct issues relating to fee billing and expenses.

Originality/value

Expert guidance from experienced investment management lawyer.

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