Review of Accounting Studies

, Volume 19, Issue 1, pp 506–538 | Cite as

A new measure of accounting quality

  • Paul Hribar
  • Todd Kravet
  • Ryan Wilson


This study develops a measure of accounting quality based on audit fees. Adopting a neoclassical view of the audit market, we argue that unexplained audit fees should contain information about accounting quality. We find that our measure of unexplained audit fees correlates positively with other empirical measures of quality. We further show that our measure of accounting quality is incrementally predictive of fraud, restatements, and SEC comment letters, controlling for other measures of quality. Overall, we believe that the information in audit fees can be used to provide an alternative measure of a firm’s accounting quality.


Accounting quality Earnings management Restatements Fraud 

JEL Classification




We appreciate the helpful comments of Andrew Acito, Bill Baber, Daniel Beneish, Dan Collins, Scott Dyreng, Cristi Gleason, Irene Kim, Laureen Maines, Bill Mayew, Rick Mergenthaler, Katherine Schipper, Terry Shevlin, Ross Watts, and workshop participants at Dartmouth College, Duke University, Florida State University, Georgetown University, Indiana University, The University of Iowa, the University of Washington, and the Yale Fall research conference. We thank Andrew Leone for providing access to the restatement classification data.


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Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  1. 1.Tippie College of BusinessThe University of IowaIowa CityUSA
  2. 2.Naveen Jindal School of ManagementUniversity of Texas at DallasRichardsonUSA
  3. 3.Lundquist College of BusinessUniversity of OregonEugeneUSA

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