Open AccessFair Value and Abnormal Audit Fees
Author(s) -
T. S. Ryabova,
Keji Chen,
Gary K. Taylor,
Rishma Vedd
Publication year - 2018
Publication title -
international journal of accounting and financial reporting
Language(s) - English
Resource type - Journals
ISSN - 2162-3082
DOI - 10.5296/ijafr.v8i3.13453
Subject(s) - accounting , fair value , proxy (statistics) , audit , business , sample (material) , quality audit , accounting information system , quality (philosophy) , value (mathematics) , mark to market accounting , historical cost , financial accounting , actuarial science , statistics , philosophy , chemistry , mathematics , epistemology , chromatography
Our study compares the financial reporting quality between a principles-based (i.e., fair value) and a rules-based (i.e., historical cost) accounting system. We explore a non-market based proxy of financial reporting quality: abnormal or unexplained audit fees. Utilizing a sample of European Union firms, we find that firms using a fair value accounting system have a lower level of abnormal audit fees. This result provides preliminary evidence that a fair value accounting system provides higher financial reporting quality.