The Effect of IAS 40 on Audit Fees
Chan-Jane Lin/Department of Accounting, National Taiwan University
Hsuan-Pin Wang/Department of Accounting, Tamkang University
Abstract
International Accounting Standard 40 (IAS 40) permits firms to have dual choices about the accounting for investment property: (1) For measurement subsequent to initial recognition, firms can choose between a fair value model and a cost model; (2) For fair value determination, firms can choose to employ external appraisers or determine the values themselves. Using Taiwanese data, this study examines the effect of the above choices on audit fees after the adoption of IAS 40. The empirical results show that the audit fees of firms using cost model exhibit a relative decrease or smaller increase if they hire external appraisers, while the audit fees of firms employing external appraisers are not significantly increased if they choose a fair value model. This paper provides preliminary evidence as to the effect on audit fees of implementing fair value accounting for non-financial assets.
Keywords
Investment propertyExternal appraisalFair value modelAudit fees
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