Accounting and Auditing Research

Accounting and Auditing Research

The impact of conditional conservatism and the Corporate governance quality in reducing litigation risks and audit fees

Document Type : Original Article

Authors
Gholamreza Kordestani
Mostafa Abdi
Mehdi Kazemi Olom
Assistant Prof, Accounting (Inviting Lecture), Faculty of Economic and Social Sciences, Bu-Ali Sina University, Hamadan, Iran
10.22034/iaar.2019.102288
Abstract
Audit fees raises By increasing litigation risks. Conditional conservatism reduces litigation risks and thereby has the negative impact on audit fees. In fact, both conservatively reporting and corporate governance are involved in reducing the uncertainty and their relationship is alternative, so whatever companies have weaker corporate governance, use more conservatism on their reporting. To reduce their risk. In this study, first, the relationship between Conditional conservatism and audit fees has been examined and then the effect of corporate governance on the relationship between conditional conservatism and audit fees have been investigated. For this purpose 1496 year- firm observations of companies listed on the Tehran Stock Exchange were analyzed. The findings shows that conditional conservatism is negatively correlated with audit fees and stronger Corporate governance undermines this negative effect. In fact, firms with stronger corporate governance, conservatism has less important role in reducing audit fees.
Keywords
Audit Fees
Conditional Conservatism
Corporate Governance
Litigation Risk
Accounting and Auditing Research
Volume 11, Issue 44
Winter 2020
Pages 23-44