The role of Auditor’s remuneration and Audit committee’s impact on the Firm Performance

The present study on the manufacturing and services firms of NSE 500 Index, India, examines the impact of audit committee characteristics and auditor’s remuneration on the firm performance as measured by accounting (ROA) and market measure (Tobin’s Q and ROE) of firm performance. Audit committee size has a positive impact on firm performance (as measured by Tobin’s Q), but it was not observed with ROA and ROE, and, on the other hand, had a negative significant impact on firm performance (as measured by ROA and ROE). Auditor remuneration also had a significant negative impact on overall firm performance. The percentage of grey, independent, and executive directors did not have any significant impact on firm performance overall, implying that although auditors’ independence is crucial, as per the Companies Act (2013), it eventually seems to hamper firm performance, as auditors’ independence plays a fair role and earnings management practices are reduced to a minimum. Moreover, the auditor’s remuneration also has a significant negative impact on firm performance, stating that the auditor’s remuneration and, in turn, usually independent auditors are critical in the valuation of the firm, which supports firm performance in the long run. However, non-audit fees did not have any significant impact on firm performance, and audit committee meetings had a positive significant impact on firm performance in the long run.