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MD&A readability, auditor characteristics, and audit fees

Author

Listed:
  • Le Wang
  • Xiaoyan Chen
  • Xing Li
  • Gaoliang Tian

Abstract

This paper investigates the relationship between audit fees and MD&A readability in China. We find that audit fees generally are higher when MD&A readability is lower. However, we find Big4 auditors and industry specialist auditors do not increase audit fees when MD&As are less readable while the other auditors do. We also find that it is the content unique to the reporting firm, rather than standard industry and market content in a MD&A that affects auditor fees. Our results also support that audit risk and audit efforts are two channels through which MD&A readability affects audit fees.

Suggested Citation

  • Le Wang & Xiaoyan Chen & Xing Li & Gaoliang Tian, 2021. "MD&A readability, auditor characteristics, and audit fees," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(4), pages 5025-5050, December.
    • Handle: RePEc:bla:acctfi:v:61:y:2021:i:4:p:5025-5050
    DOI: 10.1111/acfi.12748
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    Cited by:

    1. Li, Jing & Li, Nan & Xia, Tongshui & Guo, Jinjin, 2023. "Textual analysis and detection of financial fraud: Evidence from Chinese manufacturing firms," Economic Modelling, Elsevier, vol. 126(C).
    2. Sun, Li, 2023. "Asset redeployability and readability of annual report," Research in International Business and Finance, Elsevier, vol. 64(C).
    3. Shuolei Xu & Fangjun Wang & Charles P. Cullinan & Nanyan Dong, 2022. "Corporate Tax Avoidance and Corporate Social Responsibility Disclosure Readability: Evidence from China," Australian Accounting Review, CPA Australia, vol. 32(2), pages 267-289, June.

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