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Effect of regulatory oversight on the association between internal governance characteristics and audit fees

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  • El’fred Boo
  • Divesh Sharma

Abstract

We examine the relationship between internal governance, external audit monitoring and regulatory oversight for a sample comprising industrial companies and financial/utility companies subject to additional industry‐specific regulation. Our results indicate that the association between audit fees and board/audit committee independence and size are weaker for regulated companies. These observations are consistent with the notion that regulatory oversight partially substitutes the external audit as a monitoring mechanism. However, boards/audit committees with more multiple directorships demand a more extensive audit in the presence of regulatory oversight to protect their reputation capital. Our study enhances our understanding of the complex relationships among the major corporate governance elements.

Suggested Citation

  • El’fred Boo & Divesh Sharma, 2008. "Effect of regulatory oversight on the association between internal governance characteristics and audit fees," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 48(1), pages 51-71, March.
    • Handle: RePEc:bla:acctfi:v:48:y:2008:i:1:p:51-71
    DOI: 10.1111/j.1467-629X.2007.00229.x
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