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.