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Article
Publication date: 2 May 2017

Kuei-Fu Li and Yi-Ping Liao

The purpose of this paper is to examine the role of D&O insurance in audit pricing in Taiwan, an emerging market in which auditors face negligible litigation risk and intense…

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Abstract

Purpose

The purpose of this paper is to examine the role of D&O insurance in audit pricing in Taiwan, an emerging market in which auditors face negligible litigation risk and intense competition.

Design/methodology/approach

It examines the association between audit fees and D&O insurance coverage.

Findings

Results indicate that audit fees are higher for clients with higher D&O coverage after controlling for other determinants. Further analysis shows that auditors charge additional audit fees for clients whose insurer is foreign owned.

Originality/value

Overall, the study provides evidence that the induction of financial misstatement risks by D&O insurance is one of the contributing audit risk factors in an emerging economy context.

Details

Asian Review of Accounting, vol. 25 no. 2
Type: Research Article
ISSN: 1321-7348

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