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