مقاله انگلیسی رایگان در مورد استعفای داوطلبانه مدیران مستقل و پاسخ حسابرس – الزویر ۲۰۲۴

Abstract

We examine auditor responses to the voluntary resignation of independent directors. We show that auditors respond by increasing audit fees or rescinding engagement with their clients, but not by increasing their audit effort. Mechanism tests reveal that independent directors’ voluntary resignation leads to increased regulatory sanctions and negative media coverage, these relationships are more pronounced after the New Securities Law. Auditor response strategies follow an order of priority: at an acceptable level of perceived risk, auditors increase audit fees; when perceived risk exceeds this level, auditors will discontinue the client relationship. Auditors associate greater risk with firms that have (vs. have not) experienced consecutive voluntary resignations by independent directors. Mandatory resignation has no such effect.

Introduction

The board of directors plays a crucial role in corporate governance. The proportion of independent directors on the board is an important metric of the effectiveness of board supervision, which is emphasized by regulatory authorities (Zhu et al., 2016). The independent director system was initially established to mitigate agency problems between shareholders and management (Fama and Jensen, 1983, Dai et al., 2014). Independent directors also supervise, advise and provide support in the form of resources for listed companies (Fama and Jensen, 1983, Liu et al., 2018a, Liu et al., 2018b, Zhou et al., 2021). What signals are sent by the voluntary resignation events of independent directors? Can auditors identify the risks involved? How do auditors respond? We explore this series of questions.

Typically, the resignation events of independent directors are categorized as mandatory or voluntary. Mandatory resignation occurs when independent directors are required to step down from their roles under regulatory pressure; voluntary resignation occurs when independent directors proactively relinquish their positions, judging that the benefits of those positions do not compensate for the risks incurred. According to signaling theory, the voluntary resignation of independent directors signals company risk to external parties (Gupta and Fields, 2009, Lin et al., 2012, Bar-Hava et al., 2021, Cao et al., 2023), such as poor company performance (Arthaud-Day et al., 2006), high levels of earnings management (Zhi and Tong, 2005) or elevated legal risks (Yang and Huang, 2015). This paper focuses on the responses of auditors, as stakeholders in listed companies, to the voluntary resignation of independent directors.

Conclusion

This paper presents an in-depth exploration of auditors’ responses to the voluntary resignation of independent directors. The findings reveal that the voluntary resignation of independent directors of a listed company transmits risk signals to auditors that elevate their perception of the risk associated with that company. In response, auditors seek to mitigate this risk by charging higher audit fees or terminating their engagement with the client company. Interestingly, we find no evidence that auditors also increase their audit effort following the voluntary resignation of independent directors, indicating that the higher audit fees charged are due primarily to an increased risk premium, rather than to cost compensation. Mechanism analysis indicates that companies with voluntary resignations by independent directors face an increased risk of regulatory penalties in both the current and subsequent periods, and such companies also receive more negative media coverage.

Further analysis reveals that since the implementation of the New Securities Law, the positive relationship between the voluntary resignation of independent directors and abnormal audit fees has become more pronounced. This suggests that the new law has a deterrent effect on auditors, increasing their perception of risk and leading them to raise audit fees. Moreover, we discover that auditors follow an order of priority in responding to the risk signals conveyed by the voluntary resignation of independent directors: when they perceive the level of corporate risk to be acceptable, they prefer to increase audit fees, but when the risk exceeds their tolerance level, they are likely to terminate the engagement, leading to an auditor change.