Independent audit committee, risk management committee, and audit fees

Dyah Ayu Larasati and Melinda Cahyaning Ratri and Mohammad Nasih and Iman Harymawan (2019) Independent audit committee, risk management committee, and audit fees. Cogent Business and Management, 6 (1). ISSN 23311975

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This study aims to analyze the role of an independent audit committee on the relationship between the Risk Management Committee (RMC) and audit fees. We use 510 observations from 216 different companies indexed on the Indonesia Stock Exchange for 2014-2016. This study uses ordinary least square analysis to prove our hypotheses. We find that participation of the independent commissioner as an audit committee member will strengthen the relationship between RMC and audit fee. Consistent with the demand side of audit theory, our study shows that the existence of a stand-alone risk management committee and a more independent commissioner sitting on the audit committee will demand higher audit coverage. As a result, it will increase the audit fee. It occurs since the existence of a more independent audit committees could be able to objectively assess the risk as recommended by the RMC and respond to it by increasing the demand on audit coverage for higher audit quality, and hence increase the fees paid to the external auditor. These findings could contribute to the regulatory bodies in Indonesia in terms of providing empirical evidence on the relationship between board governance structure and audit pricing within non-financial industries companies. © 2019, © 2019 The Author(s). This open access article is distributed under a Creative Commons Attribution (CC-BY) 4.0 license.

Item Type: Article
Uncontrolled Keywords: risk management committee, board risk committee, independent audit committee, audit fees
Subjects: H Social Sciences > HB Economic Theory > HB1-3840 Economic theory. Demography
H Social Sciences > HD Industries. Land use. Labor > HD28-70 Management. Industrial Management
Divisions: Artikel Ilmiah > SCOPUS INDEXED JOURNAL
Dyah Ayu LarasatiNIM041411331051
Melinda Cahyaning RatriNIM041411331034
Mohammad NasihNIDN0006086503
Iman HarymawanNIDN0020048403
ContributionNameNIDN / NIDK
Depositing User: PPJPI
Date Deposited: 19 Mar 2020 06:44
Last Modified: 19 Mar 2020 07:27
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