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Determinants of audit fees: empirical evidence from an emerging economy

Determinants of audit fees: empirical evidence from an emerging economy Purpose – The study investigates the structure of audit fees in an emerging economy, Jordan. Design/methodology/approach – The following regression model will be tested: ADFEES = f (SIZE, AUST, COMP, INDS, PROF, RISK, YEND, TLAG). The model is tested by running a cross‐sectional linear ordinary least squares (OLS) regression of the audit fees on corporate size, the status of the audit firm, the degree of corporate complexity, profitability, risk, corporate accounting year end and the lag between the audit report and the end of the accounting year. Findings – The results of the analysis revealed that corporate size, status of the audit firm, industry type, degree of corporate complexity and risk are the main determinants of audit fees. However, variables such as corporate profitability, corporate accounting year‐end (YEND) and time lag between YEND and the audit report date appeared to be insignificant determinants of audit fees. Research limitations/implications – In order to generalize the outcome of the study, the same study needs to be conducted over a long period of time (five years). Other variables such as the market share of the audit firm and the economic conditions of the country need to be included in the regression model in future research. Originality/value – The outcome of the study can be used by audit firms to determine audit fees. Companies' management can also use the results of the study to predict the amount of audit fees that they will pay. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Commerce and Management Emerald Publishing

Determinants of audit fees: empirical evidence from an emerging economy

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References (61)

Publisher
Emerald Publishing
Copyright
Copyright © 2007 Emerald Group Publishing Limited. All rights reserved.
ISSN
1056-9219
DOI
10.1108/10569210710833635
Publisher site
See Article on Publisher Site

Abstract

Purpose – The study investigates the structure of audit fees in an emerging economy, Jordan. Design/methodology/approach – The following regression model will be tested: ADFEES = f (SIZE, AUST, COMP, INDS, PROF, RISK, YEND, TLAG). The model is tested by running a cross‐sectional linear ordinary least squares (OLS) regression of the audit fees on corporate size, the status of the audit firm, the degree of corporate complexity, profitability, risk, corporate accounting year end and the lag between the audit report and the end of the accounting year. Findings – The results of the analysis revealed that corporate size, status of the audit firm, industry type, degree of corporate complexity and risk are the main determinants of audit fees. However, variables such as corporate profitability, corporate accounting year‐end (YEND) and time lag between YEND and the audit report date appeared to be insignificant determinants of audit fees. Research limitations/implications – In order to generalize the outcome of the study, the same study needs to be conducted over a long period of time (five years). Other variables such as the market share of the audit firm and the economic conditions of the country need to be included in the regression model in future research. Originality/value – The outcome of the study can be used by audit firms to determine audit fees. Companies' management can also use the results of the study to predict the amount of audit fees that they will pay.

Journal

International Journal of Commerce and ManagementEmerald Publishing

Published: Sep 5, 2008

Keywords: Auditor's fees; Emerging markets; Jordan

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