Executive tournament incentives and audit fees
Document Type
Article
Publication Date
6-1-2017
Abstract
This study investigates whether the incentives for non-CEO executives to become the next CEO, commonly known as “tournament incentives,” influence auditor perceptions of risk. We argue that auditors are likely to view tournament incentives as affecting the risk of a material misstatement as well as the risk of litigation arising against the auditor, leading to an impact on audit fees. Using three alternative measures of tournament incentives from prior literature, we provide consistent evidence that stronger tournament incentives are associated with higher audit fees. We also find that the relation between tournament incentives and audit fees is moderated by insider CEO succession, CEO tenure, CEO age, auditor tenure, and abnormal accruals.
Publication Title
Advances in Accounting
Volume
37
First Page
30
Last Page
45
Digital Object Identifier (DOI)
10.1016/j.adiac.2016.12.001
ISSN
08826110
Citation Information
Bryan, & Mason, T. W. (2017). Executive tournament incentives and audit fees. Advances in Accounting, 37, 30–45. https://doi.org/10.1016/j.adiac.2016.12.001