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Audit fees and corporate innovation: Auditors' response to corporate innovation

Author

Listed:
  • Kim, Hyung-Tae
  • Lee, Seungwon
  • Park, Sung-Jin
  • Lee, Brandon

Abstract

We investigate the extent to which a client’s innovative effort affects the level of audit effort and whether the innovative-effort efficiency can attenuate the demand for greater audit effort associated with a client’s risky research-and-development (R&D) investments. We find that a client firm’s strategic emphasis on corporate innovations may require greater audit effort, but the efficiency of a firm’s innovative effort can attenuate the demand for heightened audit effort against risky, innovative efforts. Findings suggest that the external auditor does not always discourage corporate innovation as the efficiency of a firm’s innovation may lower the client business risk perceived by an auditor.

Suggested Citation

  • Kim, Hyung-Tae & Lee, Seungwon & Park, Sung-Jin & Lee, Brandon, 2019. "Audit fees and corporate innovation: Auditors' response to corporate innovation," MPRA Paper 101081, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:101081
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    References listed on IDEAS

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    Cited by:

    1. Hedy Jiaying Huang & Ahsan Habib & Sophia Li Sun & Ying Liu & Huiting Guo, 2021. "Financial reporting and corporate innovation: a review of the international literature," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 61(4), pages 5439-5499, December.

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    More about this item

    Keywords

    Corporate innovation; Auditors; Research and development; Risk management;
    All these keywords.

    JEL classification:

    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D

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