A new study has found a link between high auditing fees charged to public companies and the companies’ decline in financial performance for up to five years in the future.
The study, by Jonathan D. Stanley of Auburn University, appears in the current issue of Auditing: A Journal of Practice & Theory, published by the American Accounting Association, found auditing fees to be significantly related to improvements or declines in companies’ financial performance the following year and, to a lesser extent, during the subsequent four years as well. The results “reveal a significant [but] fading relationship between audit fees and future changes in operating performance that extends up to five years ahead,” according to the study.
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