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The Effect of Regulation and Financial Distress on Banks' Auditor Fees
Author(s) -
Shaw Wayne H.,
Terando William D.
Publication year - 2018
Publication title -
journal of corporate accounting and finance
Language(s) - English
Resource type - Journals
eISSN - 1097-0053
pISSN - 1044-8136
DOI - 10.1002/jcaf.22357
Subject(s) - audit , financial distress , business , accounting , consumer protection act , financial crisis , legislation , banking industry , finance , financial system , economics , political science , law , macroeconomics
The purpose of this article is to provide a comparison of the impact on audit pricing of the Sarbanes–Oxley Act of 2002 to that of the 2008 financial collapse and the resulting Dodd–Frank Wall Street Reform and Consumer Protection Act of 2010. While prior studies have documented increased audit costs due to SOX, they have not found such increases related to the other two events. We extend this research into the subsequent two events by focusing on audit pricing in the banking industry since that industry was most directly impacted by the financial crisis and Dodd–Frank. In contrast to the prior literature based on industrial firms, we find banks experienced significant increases in audit fees related to Dodd–Frank that were unexplained by traditional control variables. Finally, we find mixed evidence of economies of scale in dealing with the costs of implementing the legislation. While only smaller banks had a significant increase in audit fees as a percentage of total assets for Dodd–Frank, larger banks experienced significantly higher audit costs due to SOX. © 2019 Wiley Periodicals, Inc.