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Fair value accounting for non-current assets and audit fees: Evidence from Australian companies

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  • Yao, Dai Fei (Troy)
  • Percy, Majella
  • Hu, Fang

Abstract

We investigate the association between asset revaluations of non-current assets and audit fees, using a sample of ASX 300 companies from the years 2003–2007. We report that there is a significant increase in the audit fees paid when non-financial assets (PPEs, investment properties and intangible assets) are measured at fair values. Moreover, we provide evidence that an independent valuer or appraiser significantly weakens the positive association between asset revaluations and audit fees. Furthermore, companies whose non-current assets are revalued upwards and those that revalue their non-current assets upwards every year have significantly higher audit fees. Additional tests provide empirical evidence that the strength of corporate governance has a moderating effect on the level of audit fees. This study contributes to the ongoing debate on the role of fair value accounting. The findings suggest agency costs associated with fair value estimates may offset the benefits from the use of fair value accounting.

Suggested Citation

  • Yao, Dai Fei (Troy) & Percy, Majella & Hu, Fang, 2015. "Fair value accounting for non-current assets and audit fees: Evidence from Australian companies," Journal of Contemporary Accounting and Economics, Elsevier, vol. 11(1), pages 31-45.
    • Handle: RePEc:eee:jocaae:v:11:y:2015:i:1:p:31-45
    DOI: 10.1016/j.jcae.2014.12.003
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    Cited by:

    1. Pinprapa Sangchan & Ahsan Habib & Haiyan Jiang & Md. Borhan Uddin Bhuiyan, 2020. "Fair Value Exposure, Changes in Fair Value and Audit Fees: Evidence from the Australian Real Estate Industry," Australian Accounting Review, CPA Australia, vol. 30(2), pages 123-143, June.
    2. Muhammd Istan, 2024. "Analysis of the Influence of Assets Structure, Earning Volatility, and Financial Flexibility on Capital Structure and Corporate Performance in Manufacturing Sector Companies on the IDX," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 1, pages 49-65.
    3. Xin Qu & Daifei Yao & Majella Percy, 2020. "How the Design of CEO Equity-Based Compensation can Lead to Lower Audit Fees: Evidence from Australia," Journal of Business Ethics, Springer, vol. 163(2), pages 281-308, May.
    4. Hasnah Shaari, 2024. "Value Relevance of Fair Value Measurement on Investment Property: Malaysian Evidence," GATR Journals afr234, Global Academy of Training and Research (GATR) Enterprise.
    5. Esraa Esam Alharasis & Ahmad Saleem Tarawneh & Maha Shehadeh & Hossam Haddad & Ahmad Marei & Elina F. Hasan, 2022. "Reimbursement Costs of Auditing Financial Assets Measured by Fair Value Model in Jordanian Financial Firms’ Annual Reports," Sustainability, MDPI, vol. 14(17), pages 1-21, August.
    6. Habeeb Mohamed Nijam, 2018. "Motives for Reporting Fixed Assets at Revalued Amount: Evidence from a Developing Economy," Global Business Review, International Management Institute, vol. 19(3), pages 604-622, June.
    7. Michael E. Bradbury & Tom Scott, 2021. "What accounting standards were the cause of enforcement actions following IFRS adoption?," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(S1), pages 2247-2268, April.

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    More about this item

    Keywords

    Asset revaluations; Audit fees; Corporate governance;
    All these keywords.

    JEL classification:

    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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