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Audit Fees and IAS / IFRS Adoption: Evidence from the Banking Industry
Author(s) -
Cameran Mara,
Perotti Pietro
Publication year - 2014
Publication title -
international journal of auditing
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.583
H-Index - 21
eISSN - 1099-1123
pISSN - 1090-6738
DOI - 10.1111/ijau.12019
Subject(s) - accounting , business , audit , earnings management , earnings quality , quality (philosophy) , quality audit , liability , earnings , international financial reporting standards , banking industry , accrual , philosophy , epistemology
The adoption of I nternational A ccounting S tandards/ I nternational F inancial R eporting S tandards ( IAS / IFRS ) has two opposite effects on audit fees: on the one hand, greater effort is required from auditors, which is likely to be reflected by higher fees; on the other hand, if IAS / IFRS improve the quality of financial reporting, expected liability costs could decrease and lower fees may be demanded. We consider a large sample of Italian banks and we examine the effect of IAS / IFRS adoption on audit fees. The results show that higher fees (19.29 per cent in real terms) are paid after the switch to the new standards. Using a standard earnings management model, we do not find support for the idea that financial reporting quality is affected by the adoption of IAS / IFRS . The observed increase in fees is positively associated with the presence of financial derivatives held for hedging purposes. This paper extends the findings of prior research on the effect of IAS / IFRS adoption on audit fees; contrary to prior contributions, our analysis concentrates on the banking industry. Furthermore, unlike prior works, we consider both listed and non‐listed firms.