Audit fee increases don’t lead to better audit quality, says study

Increases in audit fees paid by public companies aren’t necessarily producing better audit quality, according to a new report.

The study, conducted by Lili Sun, an associate professor of accounting at the University of North Texas, Michael Ettredge of the University of Kansas and Matthew Sherwood of the University of Massachusetts Amherst, examined audits of internal control under Section 404(b) of the Sarbanes-Oxley Act of 2002. It will be appearing in a forthcoming issue of the Journal of Accounting and Public Policy.

“We find the small accelerated filers have the largest fee shock, which averages 107.8 percent, and large accelerated filers have a fee increase of 86.4 percent,” said Sun. “What is more interesting and which is not documented in prior studies is we also find nonaccelerated filers experience a fee shock even though they are not required to…

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