Directors' Monitoring Role, Ownership Concentration and Audit fees

Abstract

The research objective is to analyse different factors potentially involved in influencing the size of audit fees. The association between the Board of Directors and the shareholders of listed companies should be effectively developed and there should be a higher spirit of compliance with the governance code. The empirical model is constructed to assess the theoretical and statistical relationship between audit fees and corporate governance characteristics over a period of four years (for FTSE 350 companies excluding financial institutions between 2012 and 2015). Different testing techniques are used for robustness reasons. We found that Board of Directors' characteristics are significant in relation to audit fees. Some of the Audit Committee characteristics are affected by the collegiality principle in relation to the Board of Directors' characteristics. The consultative role of audit committee directors is dominated by the role of the Board of Directors. Mandatory audit fees, and not total auditors' remuneration is included in this study. While other studies assess mainly one corporate governance mechanism in relation to audit fees, we include the corporate governance mechanisms that are directly related to auditors' scope. This paper can be used as a tool for audit practitioners and corporate executives to seek a better auditor-client relationship.

Ownership Concentration and Audit Actions

“…Firstly, we examined the relationship between ownership concentration and audit fees by moderating the board composition dynamics. The independent directors enhance the monitoring process by hiring strong external auditors to require a high level of audit quality (Nehme et al 2020). The controlling shareholders can often nominate independent board members and influence key decision-making processes.…”

“…The controlling shareholders can often nominate independent board members and influence key decision-making processes. This will enhance the financial reporting and protect shareholders' wealth and reputations (Nehme et al 2020). By analyzing the correlation between ownership concentration, board independence, and audit actions, we can assess how ownership concentration translates into control over audit-related decisions.…”

Evaluation of ownership structure and audit-quality in the wake of the Covid-19 crisis: empirical evidence from Jordan

“…This basically links to the core issue in agency problems, namely, the conflict of various individuals’ interests. The interests and activities of owners’ preferences might have major effects on a firm’s strategy, performance and operations (Nehme et al , 2020). Despite the importance of how much equity the owner has, it is also essential to know the identity of such an owner, whether individual/family, company or government ownership structure.…”