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Risk Management Committee, Auditor Choice and Audit Fees

Author

Listed:
  • Iman Harymawan

    (Department of Accounting, Faculty of Economic and Business, Universitas Airlangga, Surabaya 60115, Jawa Timur, Indonesia)

  • Aditya Aji Prabhawa

    (Department of Accounting, Faculty of Economic and Business, Universitas Airlangga, Surabaya 60115, Jawa Timur, Indonesia)

  • Mohammad Nasih

    (Department of Accounting, Faculty of Economic and Business, Universitas Airlangga, Surabaya 60115, Jawa Timur, Indonesia)

  • Fajar Kristanto Gautama Putra

    (Department of Accounting, Faculty of Economic and Business, Universitas Airlangga, Surabaya 60115, Jawa Timur, Indonesia)

Abstract

We find that risk management committees and BIG4 audit firms contribute to audit fees. We use observations of 895 companies registered in Indonesia for 2014–2018, and to answer our hypothesis we used ordinary least squares analysis. The results show that BIG4 weakens the relationship between RMC and audit fees. Our study proves that higher demand for audit coverage will occur if there is a risk management committee within the company. As a result, audit fees increase. RMC may demand high-quality external guarantees, but the presence of BIG4 as a moderating variable reduces the relationship between the two variables. We assume that this can happen because auditors can work more efficiently if the company has an RMC, auditor(s) could indirectly reduce the risk because it is partially results from the performance of the RMC. In addition, we also use the robustness test to handle the endogeneity problem with consistent results as OLS. These findings provide evidence for policy makers about the relationship between audit fees and risk management committees.

Suggested Citation

  • Iman Harymawan & Aditya Aji Prabhawa & Mohammad Nasih & Fajar Kristanto Gautama Putra, 2021. "Risk Management Committee, Auditor Choice and Audit Fees," Risks, MDPI, vol. 9(9), pages 1-16, August.
    • Handle: RePEc:gam:jrisks:v:9:y:2021:i:9:p:156-:d:622771
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    References listed on IDEAS

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    Cited by:

    1. Umar Habibu Umar & Muhamad Abduh & Mohd Hairul Azrin Besar, 2023. "Standalone risk management committee, risk governance diversity and Islamic bank risk-taking," Risk Management, Palgrave Macmillan, vol. 25(3), pages 1-23, September.
    2. Eka Sari Ayuningtyas & Iman Harymawan, 2022. "Risk Management Committee and Textual Risk Disclosure," Risks, MDPI, vol. 10(2), pages 1-15, February.
    3. Raden Roro Widya Ningtyas Soeprajitno & Sri Ningsih & Iman Harymawan & Bablu Kumar Dhar & Suham Cahyono, 2023. "The School-ties Between Top Management Executive and Audit Partner: Exploring From Earnings Management in Indonesia," SAGE Open, , vol. 13(4), pages 21582440231, December.

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