FMV Cluster seminar 'US political Corruption & Audit Fees
|Speaker:||Manoj Kulchania, Mike Ilitch School of Business, Wayne State University|
|Date:||Wednesday 31 May 2017|
|Location:||Kolade Teaching Room|
We investigate the effect of corrupt public officials on the relationship between the firm and its external auditor. Using United States Department of Justice data on corruption convictions, we find that auditors charge a firm higher audit fees when it is headquartered in a corrupt region. This result is robust to a wide range of firm and demographic controls, an instrumental variables analysis, tests designed to address omitted variables, and propensity score matching. we find that firms in corrupt regionsare more likely to have weak internal controls and to bribe foreign politicians; their auditors also exert greater effort. All these factors contribute to the higher audit fees.
A buffet will follow this seminar.