Title

Executive tournament incentives and audit fees

Document Type

Article

Publication Date

6-1-2017

Subject Area

ARRAY(0x5575b05bd780)

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

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