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Short-Term debt maturity structures, credit ratings, and the pricing of audit services
Short-term debt and credit ratings have benefits for financial reporting quality that may be associated with lower audit fees. Using U.S. data for 2003 through 2006, we find that short-term debt is negatively related to audit fees for firms rated by Standard & Poor's, consistent with more monitoring and better governance mechanisms in firms with higher short-term debt. Credit ratings quality is negatively related to audit fees, consistent with ratings quality reflecting a firm's liquidity risk, governance mechanisms, and monitoring from rating agencies. We also find that the negative relation between short-term debt and audit fees is stronger for firms with low-quality credit ratings, consistent with auditors pricing lender monitoring.
History
Journal
Accounting ReviewVolume
85Issue
3Pagination
877 - 909Publisher DOI
ISSN
0001-4826Publication classification
C Journal article; C1.1 Refereed article in a scholarly journalCopyright notice
2010, American Accounting AssociationUsage metrics
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