Do corporate pension plans affect audit pricing?

Yangyang Chen, Rui Ge, Leon Zolotoy

Research output: Journal article publicationJournal articleAcademic researchpeer-review

7 Citations (Scopus)


We find that, on average, auditors charge higher fees for auditing financial statements of client firms sponsoring defined benefits (DB) pension plans than matched firms without DB pension plans. Moreover, we find that the effect of DB pension plans on audit fees is stronger when clients’ earnings are more sensitive to DB pension estimates, or when managers’ compensation induces more risk taking. Finally, we find that the additional audit fees charged for clients with DB pension plans are negatively associated with the extent of manipulations of DB pension accounting estimates. Collectively, our findings suggest that auditors consider managers’ incentive to manipulate earnings and increase audit effort to reduce audit risk associated with DB pension accounting, which results in higher audit fees.
Original languageEnglish
Pages (from-to)322-337
Number of pages16
JournalJournal of Contemporary Accounting and Economics
Issue number3
Publication statusPublished - 1 Dec 2017


  • Audit effort
  • Audit pricing
  • Audit risk
  • Earnings management
  • Pension plans

ASJC Scopus subject areas

  • Accounting


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