The effect of general counsel prominence on the pricing of audit services

Department

School of Accountancy

Document Type

Article

Publication Date

1-1-2019

Abstract

We investigate the effect of corporate general counsel (GC) ascension to the senior management team on the pricing of audit services. Prior research suggests that the GC position may have a significant influence in setting the tone at the top by promoting corporate integrity, ethics, and serving as a governance and monitoring mechanism, but also recognizes that prominent GCs may face ethical dilemmas, causing them to disregard professional responsibilities to curry the favor of the CEO and other executives. Using audit fees to proxy for audit engagement risk, we find a negative association between GC ascension to top management and audit fees. We investigate the mechanisms behind this relation and find GC ascension is associated with a reduction in both default risk and financial misstatement risk, which supports auditors’ perceived reduction in client business risk and audit risk, respectively.

Journal Title

Journal of Accounting and Public Policy

Journal ISSN

0278-4254

Volume

38

Issue

1

First Page

1

Last Page

14

Digital Object Identifier (DOI)

10.1016/j.jaccpubpol.2019.01.001

Share

COinS