Abnormal fees and timely loss recognition-a long- term perspective

Eli Amir, Yanling GUAN, Gilad Livne

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)


We examine the relation between timely loss recognition and abnormal audit, non-audit, and total fees over a period of thirteen years. We use positive abnormal audit (non-audit) fees as a measure of abnormal audit effort (economic bond). We report some evidence suggesting audit effort is associated with slower loss recognition in accruals before the Sarbanes-Oxley Act (SOX) became effective. We find stronger evidence that audit effort is associated with slower loss recognition post-SOX when clients raise substantial external funds or when the auditor is not an industry specialist. Using C_Score, we find a negative association between changes in abnormal audit fees and total fees, and changes in C_Score only post-SOX. We do not find abnormal non-audit fees are associated with the speed of loss recognition. Collectively, the results suggest post-SOX auditors exert more effort when losses are delayed and that non-audit services do not compromise auditor independence.

Original languageEnglish
Pages (from-to)1-22
Number of pages22
Issue number3
Publication statusPublished - Aug 2019

Scopus Subject Areas

  • Accounting
  • Finance
  • Economics and Econometrics

User-Defined Keywords

  • Accruals
  • Audit fees
  • Conservatism
  • Sarbanes-oxley act (sox)
  • Timely loss recognition


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