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  • Fair value accounting for non-current assets and audit fees: evidence from Australian companies

    Author(s)
    Yao, DaiFei
    Percy, Majella
    Hu, Fang
    Griffith University Author(s)
    Percy, Majella
    Yao, DaiFei
    Hu, Fang
    Year published
    2015
    Metadata
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    Abstract
    We investigate the association between asset revaluations of non-current assets and audit fees, using a sample of ASX 300 companies from the years 2003-2007. We report that there is a significant increase in the audit fees paid when non-financial assets (PPEs, investment properties and intangible assets) are measured at fair values. Moreover, we provide evidence that an independent valuer or appraiser significantly weakens the positive association between asset revaluations and audit fees. Furthermore, companies whose non-current assets are revalued upwards and those that revalue their non-current assets upwards every year, ...
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    We investigate the association between asset revaluations of non-current assets and audit fees, using a sample of ASX 300 companies from the years 2003-2007. We report that there is a significant increase in the audit fees paid when non-financial assets (PPEs, investment properties and intangible assets) are measured at fair values. Moreover, we provide evidence that an independent valuer or appraiser significantly weakens the positive association between asset revaluations and audit fees. Furthermore, companies whose non-current assets are revalued upwards and those that revalue their non-current assets upwards every year, have significantly higher audit fees. Additional tests provide empirical evidence that the strength of corporate governance has a moderating effect on the level of audit fees. This study contributes to the ongoing debate on the role of fair value accounting. The findings suggest agency costs associated with fair value estimates may offset the benefits from the use of fair value accounting.
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    Journal Title
    Journal of Contemporary Accounting and Economics
    Volume
    11
    Issue
    1
    DOI
    https://doi.org/10.1016/j.jcae.2014.12.003
    Subject
    Financial Accounting
    Applied Economics
    Accounting, Auditing and Accountability
    Banking, Finance and Investment
    Publication URI
    http://hdl.handle.net/10072/92684
    Collection
    • Journal articles

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