We thank an anonymous reviewer and participants at the 2011 AAA Annual Meeting for their valuable comments. We gratefully acknowledge financial support from the Ted Rogers School of Management and the Odette School of Business. We appreciate Linda Wong for research assistance.
Independent audit committee members’ board tenure and audit fees
Article first published online: 19 JUN 2012
© 2012 The Authors. Accounting and Finance © 2012 AFAANZ
Accounting & Finance
Volume 53, Issue 4, pages 1129–1147, December 2013
How to Cite
Chan, A. M. Y., Liu, G. and Sun, J. (2013), Independent audit committee members’ board tenure and audit fees. Accounting & Finance, 53: 1129–1147. doi: 10.1111/j.1467-629X.2012.00490.x
- Issue published online: 26 NOV 2013
- Article first published online: 19 JUN 2012
- Received 24 November 2011; accepted 25 April 2012 by Robert Faff (Editor).
- Audit committees;
- Audit fees;
- Board tenure
An independent audit committee is an audit committee on which all members are independent directors. This study examines whether independent audit committee members’ board tenure affects audit fees. On the basis of the prior literature, we formulate an unsigned hypothesis. This is because on the one hand, long board tenure audit committee members (defined as members with board tenure of 10 or more years) have greater incentives to protect their reputational capitals by purchasing increased audit effort, which positively affects audit fees. On the other hand, audit pricing reflects audit committee quality. Long board tenure audit committee members may have less need for increased audit effort because they can effectively oversee the financial reporting process themselves, which negatively affects audit fees. We find that audit fees are negatively associated with the proportion of long board tenure directors on the independent audit committee, consistent with the notion that audit committee members’ long board tenure results in lower audit effort.