Impact of the audit committee on audit fees: A review and future research agenda

Figures & data

Figure 1. Review Protocol.

Table 1. Indicative impact of reviewed studies

	Study	Future Research
Panel A: Top 10 cited studies based on Google Scholar			Google Scholar Citations
1	Abbott et al. (2003a)	Additional studies for the impact of new AC characteristics on audit fees (such as audit hours), as well as for the substitution or supplementation of new governance mechanisms at the role of ACs.	1,094
2	Goodwin‐Stewart and Kent (2006)	More refined measures of independence, expertise and diligence of AC members could be used; Exploration of the supply side and demand side effects on audit fees so as to understand the inter-relationship between the various monitoring mechanisms.	622
3	Yatim et al. (2006)	Not mentioned	471
4	Zaman et al. (2011)	Focus on the relationship between audit fees and more specific types of financial expertise (e.g. accounting, finance, tax).	459
5	Cohen et al. (2014)	Emphasizing on AC members who possess a combination of industry specific knowledge and accounting expertise.	456
6	Abbott et al. (2003b)	The inclusion of i) audit opinions for companies that facing financial difficulties, ii) the likelihood of financial statement restatements, iii) SEC enforcement action and iv) auditor changes and resignations.	408
7	Engel et al. (2010)	Examination of the way financial compensation incentives interact with reputational incentives to impact the efficiency of the ACs in monitoring financial reporting.	325
8	Collier and Gregory (1996)	Not mentioned	312
9	Krishnan and Visvanathan (2009)	The investigation of the negative relationship between audit fees and the ratio of AC members with accounting expertise in small and medium companies.	307
10	Stewart and Munro (2007)	More emphasis on other factors of governance (such as board structure) and their impact on audit fees.	289
Panel B: Top 10 cited studies based on CPY (citations per year)			CPY
1	Abbott et al. (2003a)	Additional studies for the impact of new AC characteristics on audit fees (such as audit hours), as well as for the substitution or supplementation of new governance mechanisms at the role of ACs.	54.70
2	Cohen et al. (2014)	Emphasizing on AC members who possess a combination of industry specific knowledge and accounting expertise.	50.67
3	Zaman et al. (2011)	Focus on the relationship between audit fees and more specific types of financial expertise (e.g. accounting, finance, tax).	38.25
4	Ghafran and Sullivan N (2017)	Promoting interview with audit committee members to get a better understanding of how members’ experience and expertise impact the degree of audit intensity they desire.	38.00
5	Goodwin‐Stewart and Kent (2006)	More refined measures of independence, expertise and diligence of AC members could be used; Exploration of the supply side and demand side effects on audit fees so as to understand the inter-relationship between the various monitoring mechanisms.	36.59
6	Nekhili et al. (2020)	Future studies could investigate the mechanism by which female directors influence audit fees.	31.33
7	Lai et al. (2017)	Not mentioned	30.17
8	Yatim et al. (2006)	Not mentioned	27.71
9	Beck and Mauldin (2014)	Examination of the relationship among Chief financial officer (CFO) and audit committees and auditors regarding audit fees.	25.33
10	Engel et al. (2010)	Examination of the way financial compensation incentives interact with reputational incentives to impact the efficiency of the ACs in monitoring financial reporting.	25.00

*As of 05 July 2023.

Figure 2. Number of studies and cumulative citations on the impact of AC on AFs by year.

Note: N = 78, citations drawn from Google Scholar 05 July 2023.

Table 2. Results of analysis of research question 1 on three criteria

A. Number of studies per journal discipline

Managerial Auditing Journal

13 (16.7%)

Account /2 /A

The International Journal of Accounting

1 (1.3%)

Account /3/ A

International Journal of Auditing

5 (6.3%)

Account /2 /A

Journal of Applied Accounting Research

1 (1.3%)

Account /2/ B

European Accounting Review

5 (6.3%)

Account /3/ A*

International Journal of Managerial and Financial Accounting

1 (1.3%)

Account /2/ B

Accounting & Finance

5 (6.3%)

Account /2/ A

Asia-Pacific Journal of Accounting & Economics

1 (1.3%)

Account /2/ B

Journal of Contemporary Accounting & Economics

4 (5%)

Account /2/ A

Advances in Accounting

1 (1.3%)

Account /2/ A

Accounting Research Journal

3 (3.7%)

Account /2/ B

Applied Financial Economics

1 (1.3%)

Finance /2/ B

Contemporary Accounting Research

3 (3.7%)

Account /4/ A*

International Journal of Disclosure & Governance

1 (1.3%)

Account /2/ B

The Accounting Review

2 (2.6%)

Account /4/ A*

International Journal of Accounting, Auditing and Performance evaluation

1 (1.3%)

Account /2/ C

Journal of Accounting, Auditing & Finance

2 (2.6%)

Account /3/ A

International Journal of Islamic and Middle Eastern Finance & Management

1 (1.3%)

Finance /1/ B

Journal of Business Finance & Accounting

2 (2.6%)

Account /3/ A*

Pacific Accounting Review

1 (1.3%)

Account /1/ B

Review of Quantitative Finance & Accounting

2 (2.6%)

Finance /3/ B

South African Journal of Business Management

1 (1.3%)

IB & Area /1/ Str., Manag & Org. Behav./ C

Auditing: A Journal of Practice & Theory

2 (2.6%)

Account /3/ A*

African Journal of Economic and Management Studies

1 (1.3%)

Str., Manag & Org. Behav./-/C

The British Accounting Review

2 (2.6%)

Account /3/ A*

International Journal of Accounting & Information Management

1 (1.3%)

Account/2/B

Asian Review of Accounting

2 (2.6%)

Account /2/ B

Journal of Indian Business Research

1 (1.3%)

Ethics-CSR-Man/1/C

Australasian Accounting, Business and Finance Journal

2 (2.6%)

Account /1/ B

Spanish Journal of Finance and Accounting

1 (1.3%)

Account/-/B

Cogent Business & Management

2 (2.6%)

Ethics-CSR-Man/ 1/ -

International Journal of Financial Studies

1 (1.3%)

Finance/-/B

Journal of International Accounting, Auditing and Taxation

2 (2.6%)

Account/3/B

Journal of Corporate Accounting & Finance

1 (1.3%)

Account/-/B

Journal of Accounting & Economics

1 (1.3%)

Account /4*/A*

Journal of Business Ethics

1 (1.3%)

Ethics-CSR-Man/3/ Str., Manag & Org. Behav./A

Critical Perspectives on Accounting

1 (1.3%)

Account /3/A

Total

78

B. Geographic area (i.e. location/regions)

B1. Europe

20 (25.6%)

B2. Asia

14 (18%)

B3. Oceania/Australia

10 (12.8%)

B4. Africa

3 (3.8%)

B5. America

30 (38.5%)

B6. Worldwide

1 (1.3%)

Total

78

C. Number of studies per countries classified according to the MSCI

C1. Developed

C2. Emerging

C3. Frontier

C4. Standalone

Americas

No.

Europe, Middle East & Africa

No.

Asia Pacific

No.

Europe, Middle East & Africa

No.

Asia Pacific

No.

Europe, Middle East & Africa

No.

Europe, Middle East & Africa

No.

USA

29

UK

12

Australia

8

Greece

1

Malaysia

4.25

Jordan

1

Lebanon

1

Canada

2

France

1

New Zealand

2

Egypt

1

India

1.25

Nigeria

1

Finland

1

Hong Kong

0.25

Indonesia

2

Oman

1

Sweden

2

Singapore

0.25

Korea

1

Ghana

1

Germany

1

China

1

Italy

1

Emirates

1

Multiple*

1

Total

31 (40%)

20 (26%)

10.5 (13%)

2

9.5 (12%)

4

1

-3%

-5%

-1%

Note: In case more than one country was included, we computed the relative weight of each country.

*This study includes France, Germany, Italy, Spain, Belgium, The Netherlands, Portugal and the U.K.

Figure 3. Representation of research themes and sub-themes.

Table 3. Results of analysis of research question 2 on the first two criteria

D. Number of studies by type of research method		E. Number of studies by data collection
D1. Quantitative methods	76 (97.4%)	E1. Hand collected data		25 (32%)
D2. Qualitative methods	1 (1.3%)	E2. Databases		22 (28%)
D3. Experiments	1 (1.3%)	E3. Mixed approach		30 (39%)
	78	E4. n.d.		1 (1%)
				78
Theoretical perspective(s)	No of papers	The prediction of AC characteristics on AFs	The effect of AC characteristics on AFs
Panel A: Theories (F)
F1. Demand and supply	31	+/-	+/-/n.r.
F2. Demand and supply (by demand side)	26	+	+/-
F3. Demand and supply (by supply side)	12	-	+/-/n.r.
F4. Actor-network*	1	NA	NA
F5. NA	8	NA
	78
Panel B: Supplementary theoretical perspectives
For demand and supply (both sides)
Agency theory	5	+/-	+
Agency theory, corporate governance theory and political theory	1	+/-	+
Agency theory and institutional theory	1	+	+
Similarity-attraction theory	1	+/-	+
Agency theory, signaling theory and human capital theory	1	+/-	+
Agency theory and resource dependency theory	1	+/-	+/-
Agency theory, stakeholder theory and critical mass theory	1	+	+
Agency theory and stakeholder theory	1	+	+
Social dissimilarity theory and similarity-attraction theory	1	+/-	-
NA	18	NA
	31
For demand and supply theory (by demand side)
Agency theory	12	+	+/- **
Agency theory and managerial productivity theory	1	+	+
Agency theory and institutional theory	1	+	+
Agency theory, alignment theory and entrenchment theory	1	NA	-***
Organizational behavior theory	1	+	+
NA	10	NA
	26
For demand and supply theory (by supply side)
Ethnicity theory and political economy theory	1	+****	+****
NA	11	NA
	12

Notes: NA= not application, +: positive, -: negative, n.r.: no relationship.

*This is a qualitative study and it used different theoretical approach from the other empirical studies.

**From the 12 studies using Demand and supply theory (by demand side) along with agency theory, only 1 found both positive and negative relationships. This is the study of Schrader and Sun (2019) which examined the association between equity compensation and audit fees.

***This study (Liu et al., 2021) examined the relationship between AC equity compensation and audit fees—same as Schrader and Sun (2019) – and found negative relationship.

****Based on the supply-side perspective that a better (poorer) quality AC is likely to decrease (increase) audit risk assessment which can be expected to lower (increase) audit effort and audit fees. The study of Johl et al. (2012) hypothesizes and present evidence that there is a positive relationship between the proportion of bumiputra member on the AC and AF. Despite this positive prediction/effect, in practice they argue that the presence of bumiputra members on the AC reduce the quality of AC (due to decreased reputation, accountability and CG).

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