Risk management committee, auditor choice and audit fees

Iman Harymawan, Aditya Aji Prabhawa, Mohammad Nasih, Fajar Kristanto Gautama Putra

Research output: Contribution to journalArticlepeer-review

5 Citations (Scopus)

Abstract

We find that risk management committees and BIG4 audit firms contribute to audit fees. We use observations of 895 companies registered in Indonesia for 2014–2018, and to answer our hypothesis we used ordinary least squares analysis. The results show that BIG4 weakens the relationship between RMC and audit fees. Our study proves that higher demand for audit coverage will occur if there is a risk management committee within the company. As a result, audit fees increase. RMC may demand high-quality external guarantees, but the presence of BIG4 as a moderating variable reduces the relationship between the two variables. We assume that this can happen because auditors can work more efficiently if the company has an RMC, auditor(s) could indirectly reduce the risk because it is partially results from the performance of the RMC. In addition, we also use the robustness test to handle the endogeneity problem with consistent results as OLS. These findings provide evidence for policy makers about the relationship between audit fees and risk management committees.

Original languageEnglish
Article number156
JournalRisks
Volume9
Issue number9
DOIs
Publication statusPublished - Sept 2021

Keywords

  • Audit fee
  • Big 4
  • Risk management committee

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