How Do Auditor Fees Affect Accruals Quality? Additional Evidence

This study examines whether the Sarbanes-Oxley Act (SOX) moderates the association between auditor fees and accruals quality. Using a large sample of firms, we first confirm the results of Srinidhi and Gul, showing that in the pre-SOX years, higher audit fees (non-audit fees) denoting higher effort (rents) imply higher (lower) accruals quality. However, we find that post-SOX, these associations weaken or disappear in some specifications. This study also finds that lengthy auditor tenure attenuates the relationship between audit fees and accruals quality. These findings provide new evidence to investors and policymakers on the impact of SOX on auditor fees and audit quality, and have implications for academic studies that use auditor fees as a proxy for audit quality.