Corporate political donations and audit fees: Some evidence from Australian audit pricing

Ferdinand A. Gul; Arifur Khan; Karen Lai; Dessalegn Getie Mihret; Mohammad Badrul Muttakin

doi:10.1111/ijau.12334

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Corporate political donations and audit fees: Some evidence from Australian audit pricing

Journal article

Peer reviewed

Corporate political donations and audit fees: Some evidence from Australian audit pricing

Ferdinand A. Gul, Arifur Khan, Karen Lai, Dessalegn Getie Mihret and Mohammad Badrul Muttakin

International Journal of Auditing, Vol.28(2), pp.340-363

2024

DOI: https://doi.org/10.1111/ijau.12334

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Abstract

agency costs

audit fees

audit risk

government contracts

political donation

strategic investments

We examine whether corporate political donations (CPDs) are associated with audit fees in the Australian setting. Our baseline results based on observations of Australian top 500 non‐financial companies show that, on average, firms with CPDs are associated with about 9% lower audit fees than firms without CPDs consistent with the strategic investment or resource dependency view. Using path analysis, we next show that high earnings quality resulting from strategic benefits of CPDs explains the association. Overall, these results confirm that firms use CPDs as strategic investments that are associated with lower earnings management, which leads to lower audit risk and hence reduced audit fees.

Details

Title: Corporate political donations and audit fees: Some evidence from Australian audit pricing
Authors: Ferdinand A. Gul (Author) - University of the Sunshine Coast, Queensland, School of Business and Creative Industries
Arifur Khan (Author) - Deakin University
Karen Lai (Author) - Shenzhen University
Dessalegn Getie Mihret (Author) - RMIT University
Mohammad Badrul Muttakin (Corresponding Author) - Deakin University
Publication details: International Journal of Auditing, Vol.28(2), pp.340-363
Publisher: Wiley-Blackwell Publishing Ltd.
DOI: 10.1111/ijau.12334
ISSN: 1099-1123
Data Availability: All data are publicly available from sources identified in the text
Organisation Unit: School of Business and Creative Industries
Language: English
Record Identifier: 99971189402621
Output Type: Journal article

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Collaboration types: Domestic collaboration; International collaboration
Web Of Science research areas: Business, Finance

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