Journal article
Auditor Fees and Cost of Debt
Journal of accounting, auditing & finance, Vol.23(1), pp.1-22
01/01/2008
DOI: 10.1177/0148558X0802300103
Abstract
Using a sample of 560 new debt issues, we investigate the relation between audit, nonaudit, and total auditor fees and firms' cost of debt. The Securities and Exchange Commission (SEC) argues that fees from nonaudit services weaken auditor independence, reduce financial statement reliability, and increase firms' cost of capital. To test this assertion, we examine the association between auditor fees and the cost of debt, as well as the effects of auditor fees on the relation between financial statement information and the cost of debt. We find evidence that nonaudit fees are directly related to the cost of debt for investmentgrade issuers. Our results are robust to controlling for auditor tenure and firm governance. We also find evidence that the association between earnings and the cost of debt decreases as audit fees increase. We find no evidence that auditor fees directly affect the cost of debt for the noninvestment-grade firms, but we do find that the association between earnings and the cost of debt decreases as nonaudit fees increase.
Details
- Title: Subtitle
- Auditor Fees and Cost of Debt
- Creators
- Dan Dhaliwal - University of ArizonaCristi Gleason - University of IowaShane Heitzman - University of RochesterKevin Melendrez - New Mexico State University
- Resource Type
- Journal article
- Publication Details
- Journal of accounting, auditing & finance, Vol.23(1), pp.1-22
- Publisher
- Sage
- DOI
- 10.1177/0148558X0802300103
- ISSN
- 0148-558X
- eISSN
- 2160-4061
- Number of pages
- 22
- Language
- English
- Date published
- 01/01/2008
- Academic Unit
- Accounting
- Record Identifier
- 9984380394602771
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