THE DETERMINANTS OF AUDIT FEES: SOME EMPIRICAL MODELS

G. Whittington, Chris Pong

Research output: Contribution to journalArticle

Abstract

This paper proposes a model of audit fee determination based upon size and other characteristics of the auditee and the auditor, and upon whether there has been a recent change of auditor (which might lead to a low-balling effect). A novel feature of the model is that auditee size is measured in two dimensions, sales and assets, and is allowed to have a quadratic relationship with audit fee. The model was estimated for a sample of large listed UK companies for the years 1981 to 1988. The results support the low-balling hypothesis and also provide insights into the distinctive role of the Big 8 firms in the audit market.
Original languageEnglish
Pages (from-to)1071-1095
JournalJournal of Business Finance and Accounting
Volume21
Issue number8
DOIs
Publication statusPublished - 1 Dec 1994

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