Internal control quality and audit fees: does the CIO matter?
by Jean R. Bradley; Harrison Liu; Jennifer Yin
International Journal of Accounting, Auditing and Performance Evaluation (IJAAPE), Vol. 20, No. 3/4, 2024

Abstract: This study investigates the influence of the chief information officer (CIO) on internal control over financial reporting (ICFR) and audit fees. We find that firms with CIOs in the top management team (TMT) are significantly less likely to receive an adverse Section 404 report. We also find that audit fees are lower for firms with high-status CIOs in industries with low IT spending. In high IT-intensity industries, audit fees are higher, consistent with the higher risk associated with IT spending. These results provide evidence that, while CIOs in the TMT are associated with better overall internal control quality, the promise of lower audit fees through sophisticated IT system controls has not been fully realised.

Online publication date: Tue, 07-May-2024

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