Determinants of Audit Fees: Evidence from Jordan

Abstract

This study sets out to examine the factors influencing the level of external audit fees paid by firms to their auditors in Jordan. Specific attention is focused on the investigation of the potential influence of auditee size, complexity of client, profitability, client risk, auditor size and auditor tenure on audit fees, by using the Sample which contains 117 non-financial Jordanian companies which listed on Amman Stock Exchang, meet the selection standards and have the applicable and appropriate financial data from 2010 until 2012 (351 observation). The current study strongly reinforces that greatest of prior studies results are also appropriate and applicable to the Jordanian audit market. Moreover, the current study provides further evidence connecting variables such as the auditor tenure effects and auditee risk which have been found to have an inconclusive relationship with the amount of external audit fees in prior studies. However, the auditee size seems to have been the key determinant of external audit fees. Furthermore, financial risk is found to be negatively and significantly associated with the level of external audit fees. On other side, empirical results found that the audit tenure has no significant relationship with audit fees. Finally, the current study is unique because it is the first to empirically examine factors impacting the level of audit fees in Jordan for a total of three years; it revisits the audit fee literature and highlights the important determinants that affect audit fees.

Determinants of Audit Fees for Portugal and Spain

“…Unlike to Kikhia (2015) which showed that manufacturing industries pay higher audit fees in Jordan, in Spain this type of industry does not have a significant effect on the amount of audit fees paid. On the other hand, electricity, gas, steam and air conditioning activities pay significantly higher audit fees, while construction and wholesale and retail activities, repair of motor vehicles and motorcycles pay significantly lower audit fees.…”

Free to Choose: Do Voluntary Audit Reforms Increase Employment Growth?

“…This implies that 1,830 new jobs were created in the year following the reform. We also find substantial industry heterogeneity in how the reform affected employment growth, suggesting that there are significant industry differences in how audit regulations affect the growth aspirations of a firm and their perceived costs of auditing (Anderson & Zéghal, 1994;Gonthier-Besacier & Schatt, 2007;Hassan & Naser, 2013;Kikhia, 2015). Our findings thus indicate that mandatory audits act as a growth barrier, and provide support for institutional reforms that make audits voluntary for small firms.…”

Audit Partner Tenure, Audit Quality and Audit Fees: Evidence from Jordanian Firms

“…So, the residual percent deviations in audit fees (AUDFEES) can be described by other variables differently than audit partner tenure (TENURE) H1: Audit Partner Tenure is not associated substantially with audit fees After reading the probability value of audit partner tenure (TENURE) which is 0.0000 below 0.05, it notice that through three control variables: company size (COMPSIZE), return on asset (ROA) and board size (BORDSIZE), audit partner tenure (TENURE) is an materialistic variable to explain audit fees (AUDFEES), thus the null hypothesis should be not accepted, but accept the alternative hypothesis that audit partner tenure (TENURE) is associated basically with audit fees through company size (COMPSIZE), return on asset (ROA) and board size (BORDSIZE). This results is convenient with (Kealey, et al, 2007), and inconvenient with (Kikhia, 2015), It is thus likely to conclude that the audit partner tenure (TENURE) is an independent variable that is important for the explanation of the Jordanian manufacturing companies' audit fees (AUDFEES). H2: Audit Quality is not associated substantially with audit fees By initiating the above results, we can observe that R-squared 0.7627 is more than 0.60, which drove to that the data of this model is extremely suited, as well as that 0.7627 percent deviations in audit fees (AUDFEES) via three control variables: company size (COMPSIZE), return on asset (ROA) and board size (BORDSIZE), can be described by audit quality (AQ) that expressed by Big audit firms (BIG4).…”

“…In this study it appeared that what leads to higher audit fees is the quality of audit services provided. (Kikhia, 2015) indicated that there is an irreconcilable association between the auditor tenure, audit risk and audit fees. However, the size of audit appeared to be a key operator in priming audit fees.…”