An Analysis of Audit Fees Following the Passage of Sarbanes-Oxley
Asia-Pacific Journal of Accounting and Economics, Forthcoming
Posted: 16 May 2007
Abstract
This study analyzes audit fees following SOX, in particular, the residual increase in audit fees controlling for those factors predicted to change such fees but for the Act. We find significant relations between residual audit fees and incremental audit risk, audit effort, and auditor changes. These factors are noticeably more influential in the period following SOX that includes the implementation of section 404 on internal control. Our results imply that SOX most likely caused an increase in the auditing profession's share of the risk of defective financial statements and client companies' resources to audit a costlier accounting system.
Keywords: Sarbanes-Oxley, audit fees, SEC certification, section 404, internal control
JEL Classification: C30, K22, L80, M41, M49, G38
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