Litigation risk, audit quality, and audit fees: Evidence from initial public offerings
R Venkataraman, JP Weber… - The Accounting …, 2008 - publications.aaahq.org
We use the IPO setting to examine the relation between auditor exposure to legal liability
and audit quality and audit fees. With regard to audit quality, we report robust evidence that
pre-IPO audited accruals are negative and less than post-IPO audited accruals. In contrast to
extant literature, our findings provide scant support for the inference that auditors acquiesce
to opportunistic earnings management by issuers in an attempt to increase the offering price.
With regard to audit fees, we find auditors earn higher fees for IPO engagements than post …
and audit quality and audit fees. With regard to audit quality, we report robust evidence that
pre-IPO audited accruals are negative and less than post-IPO audited accruals. In contrast to
extant literature, our findings provide scant support for the inference that auditors acquiesce
to opportunistic earnings management by issuers in an attempt to increase the offering price.
With regard to audit fees, we find auditors earn higher fees for IPO engagements than post …
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