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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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    References listed on IDEAS

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    Cited by:

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    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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