Title: Accounting principle choice by ADR firms and auditors' fees

Authors: David L. Senteney; Grace H. Gao; Mohammad S. Bazaz

Addresses: School of Accountancy, Ohio University, 510 Copeland Hall, Athens, OH 45701, USA ' IMC Integrated Marketing Communications, Perley Isaac Reed School of Journalism, West Virginia University, Morgantown, WV 26506, USA ' College of Business and Public Policy, California State University, 5500 University Parkway, San Bernardino, CA 92407, USA

Abstract: This paper examines whether ADR issuers, selecting US GAAP, IFRS, or home-country accounting principles for the preparation of financial statements accompanying the Form 20-F filing, are paying different auditors' fees. We employ the Heckman Probit decision choice model and two-stage OLS correction to estimate the impact of selection of Form 20-F accounting standards upon ADR firms periodic auditors' fees. We find that firms choosing to present US GAAP financial statements incur the highest auditors' fees, while firms choosing to present IFRS financial statements accompanying the Form 20-F filing incur the second largest auditors' fees. They also find that ADR firms incur significantly greater costs (associated with Form 20-F filings) than non-US firms opting not to list on the major US stock exchanges in order to improve comparability with other firms listed on the major US exchanges.

Keywords: ADRs; American depositary receipts; accounting principle choice; auditor fees; accounting principles; financial statements; GAAP; IFRS; auditing.

DOI: 10.1504/IJAAPE.2014.066390

International Journal of Accounting, Auditing and Performance Evaluation, 2014 Vol.10 No.4, pp.327 - 363

Received: 27 Jun 2013
Accepted: 08 Nov 2013
Published online: 27 Dec 2014 *

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