Local creative culture and audit fees
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Date
2023-03-13
Open Access Location
Journal Title
Journal ISSN
Volume Title
Publisher
Elsevier Ltd on behalf of British Accounting Association
Rights
Abstract
This paper examines the association between local creative culture and audit fees. Using a large, unbalanced panel data of listed US firms between 2004 and 2018, we find evidence that firms headquartered in US counties with high creative culture tend to pay higher audit fees than firms headquartered in counties with low creative culture. We also find that such firms tend to have longer audit report lag and are subject to more shareholder litigation. Cross-sectional tests show that real earnings management, managerial risk-taking propensity, and external corporate governance environment moderate the positive association between creative culture and audit fees. The positive association between local creative culture and audit fees remains robust to controlling for endogeneity concerns. Our study contributes to the emerging literature on local creative culture by providing evidence that local creative culture encourages managers and employees to undertake risky initiatives, thereby increasing audit risks.
Description
Keywords
Creative culture, Audit fees, Real earnings management, Risk-taking, Corporate governance
Citation
Costa MD, Habib A. (2023). Local creative culture and audit fees. British Accounting Review. 55. 2.