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The Impact of Fair Value Measurement on Audit Fees: Evidence from Financial Institutions in 24 European Countries
2016 (English)In: International Journal of Auditing, ISSN 1090-6738, E-ISSN 1099-1123, Vol. 20, no 3, 255-266 p., IJAU12075Article in journal (Refereed) Published
Abstract [en]

The purpose of the study is to investigate the relationship between fair value measurement and audit fees. Using a sample of 177 banks from 24 European countries over the period 2008–13, we find that high uncertainty fair value assets are positively related to audit fees. The result is consistent with the suggestion that more complex estimates require greater audit effort. To provide more insight into the impact of fair value measurement on audit fees, we examine this relation under institutional settings with different strength of regulations. The results suggest that the strength of a country's institutional setting is positively related to effort spent on evaluation of higher uncertainty fair value inputs. The finding is consistent with the prediction that auditors expend more effort in more strongly regulated settings due to higher potential litigation costs. Finally, we find that the total proportion of fair-valued assets does not affect audit fees. The result can be attributed to the composition of the total proportion of fair-valued assets which is dominated by low uncertainty (Level 1) inputs.

Place, publisher, year, edition, pages
2016. Vol. 20, no 3, 255-266 p., IJAU12075
Keyword [en]
Audit fees, banking industry, fair value measurement, IFRS 7V
National Category
Economics and Business
Research subject
Business Studies
URN: urn:nbn:se:umu:diva-126697DOI: DOI: 10.1111/ijau.12075OAI: diva2:1034766
Available from: 2016-10-13 Created: 2016-10-13 Last updated: 2016-10-13

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Alexeyeva, Irina
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