Audit fees and corporate innovation: Auditors' response to corporate innovation

Kim, Hyung-Tae and Lee, Seungwon and Park, Sung-Jin and Lee, Brandon (2019): Audit fees and corporate innovation: Auditors' response to corporate innovation.

Abstract

We investigate the extent to which a client’s innovative effort affects the level of audit effort and whether the innovative-effort efficiency can attenuate the demand for greater audit effort associated with a client’s risky research-and-development (R&D) investments. We find that a client firm’s strategic emphasis on corporate innovations may require greater audit effort, but the efficiency of a firm’s innovative effort can attenuate the demand for heightened audit effort against risky, innovative efforts. Findings suggest that the external auditor does not always discourage corporate innovation as the efficiency of a firm’s innovation may lower the client business risk perceived by an auditor.

• Item Type: MPRA Paper
• Language: English
• Keywords: Corporate innovation; Auditors; Research and development; Risk management
• Subjects: M - Business Administration and Business Economics ; Marketing ; Accounting ; Personnel Economics > M4 - Accounting and Auditing > M42 - Auditing; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O32 - Management of Technological Innovation and R&D

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