Determinants of Minimum Audit Fee Compliance:
Evidence from an Emerging Economy
Abstract
This research investigates firm-specific determinants of minimum audit fee compliance (MAFC) of the listed companies in Bangladesh. MAFC is measured using a dichotomous variable of 1 if a firm complies with the minimum audit fee (MAF) guideline and 0 otherwise. Data used in this study are collected from the companies’ annual and corporate governance reports and analyzed using the logistic regression model. By utilizing 688 firm-year observations from 2016 to 2023, we find that firm size, cashflows, profitability, and directors’ ownership are the significant determinants of MAFC. Nevertheless, leverage, age, and board independence are found insignificant determinants of MAFC which contradicts prior findings as corporate governance system is weak in Bangladesh. The findings can be underpinned by the agency and legitimacy theories. This study can contribute largely to the economic and theoretical advancement of the body of existing literature with policy implications for regulators, auditors and firms as the literature on MAF is scarce. To the author’s knowledge, this is the first study on minimum audit fees from a quantitative perspective from the unique regulatory setting of Bangladesh.
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References
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Alanezi, F. and Alfraih, M. (2016). The awareness of external auditors and the management of Kuwaiti listed companies on determinants of audit fees: an exploratory study. International Journal of Business and Management, 11(1), p.108.
Alhababsah, S. and Yekini, S. (2021). Audit committee and audit quality: An empirical analysis considering industry expertise, legal expertise, and gender diversity. Journal of International Accounting, Auditing, and Taxation, 42, p.100377.
Ashan, M.M. and Shahneaz, M.A. (2015). The Effects of Prohibition of Non-Audit Services on Audit Quality and Fees: A Study on Bangladesh. Research Journal of Finance and Accounting, 6(9), pp.216-224.
Ayoola, T.J. (2022). Audit fees, audit seasonality, and audit quality in Nigeria: A mediation analysis. Journal of Financial Reporting and Accounting, (ahead-of-print).
Bota-Avram, C., Grosanu, A., Rachisan, P. R., & Ivan, R. O. (2018). Determinants of audit fees: Empirical evidence from Romanian public-interest entities. 2nd International Scientific Conference. DOI: 10.31410.itema.2018.599
Bozec, R., & Dia, M. (2017). Monitoring function of the board and audit fees: Contingent upon ownership concentration. International Journal of Accounting & Information Management, 25(1), 70-90. DOI: 10.1108/IJAIM-05-2016-0054
Cahan, S.F. and Sun, J. (2015). The effect of audit experience on audit fees and audit quality. Journal of Accounting, auditing & finance, 30(1), pp.78-100.
Carcello, J.V., Hermanson, D.R., Neal, T.L. and Riley Jr, R.A. (2002). Board characteristics and audit fees. Contemporary accounting research, 19(3), pp.365-384.
Carson, E., Fargher, N., Simon, D.T. and Taylor, M.H. (2004). Audit fees and market segmentation–further evidence on how client size matters within the context of audit fee models. International Journal of Auditing, 8(1), pp.79-91.
Cobbin, P.E. (2002). International dimensions of the audit fee determinants literature. International Journal of Auditing, 6(1), pp.53-77.
Dabor, A. O., & Ohonba, N. (2014). Determinants of audit fee in Nigerian banking sector. West African Journal of Business and Management Sciences, 4(1), 95-105.
Dando, N. and Swift, T. (2003). Transparency and assurance minding the credibility gap. Journal of Business Ethics, 44(2), pp.195-200.
Deegan, C., Rankin, M. and Tobin, J. (2002). An examination of the corporate social and environmental disclosures of BHP from 1983‐1997: A test of legitimacy theory. Accounting, Auditing & Accountability Journal.
Efron, B. (1988). Logistic regression, survival analysis, and the Kaplan-Meier curve. Journal of the American statistical Association, 83(402), pp.414-425.
Egbunike, C.F., Igbinovia, I.M., Okafor, K.J. and Mmadubuobi, L.C. (2023). Residual audit fee and real income smoothing: evidence from quoted non-financial firms in Nigeria. Asian Journal of Accounting Research, 8(1), pp.66-79.
Ghosh, T. (2019). Corporate Governance and Audit Fees Evidence from Bangladeshi Listed Banks and NBFIs. Corporate Governance, 3(1).
Griffin, P.A., Lont, D.H. and Sun, Y. (2008). Corporate governance and audit fees: Evidence of countervailing relations. Journal of Contemporary Accounting & Economics, 4(1), pp.18-49.
Griffin, P.A., Lont, D.H. and Sun, Y. (2010). Agency problems and audit fees: further tests of the free cash flow hypothesis. Accounting & Finance, 50(2), pp.321-350.
Habib, A., Jiang, H., & Zhou, D. (2015). Related party transaction and audit fees: Evidence from China. Journal of International Research, 14(1), 1-67.
Haque, T., Afroze, S. and Tuz-Zohra, F. (2019). Impact of corporate governance on audit fees and audit quality: A Study in insurance industry in Bangladesh. The cost and Management, 47(2), pp.4-11.
Hassan, Y. and Naser, K. (2013). Determinants of audit fees: Evidence from an emerging economy.
Hossain, M. N., & Sobhan, R. (2019). Determinants of audit fees: Evidence from pharmaceutical and chemical industry of Bangladesh. International Journal of Trend in Scientific Research and Development, 4(1), 814- 821.Available online: www. Ijtsrd.com
Inchausti, A. G. (1997). The influence of company characteristics and accounting regulation on information disclosed by Spanish firms. European Accounting Review, 6(1), 45-68.DOI:10.1080/096381897336863
Jayeola, O., Olugboyega, K.S., Adekunle, A.M. and Olympus, O.O. (2020). Determinants of audit quality: evidence from Nigerian listed insurance companies. Вестник Волгоградского государственного университета. Серия 3: Экономика. Экология, 22(2), pp.182-192.
Jizi, M., & Nehme, R. (2018). Board monitoring and audit fees: The moderating role of CEO/chair dual roles. Managerial Auditing Journal, 33(2), 217-243.DOI: 10.1108/MAJ-10-2016-1464
Joshi, P., & AL‐Bastaki, H. (2000). Determinants of audit fees: evidence from the companies listed in Bahrain. International journal of auditing, 4(2), 129-138. DOI:10.1111/1099-1123.00308
Joshi, P.L., Deshmukh, A. and Azibi, J. (2021). The Effects of Internal Audit, Audit Committee and Firm Characteristics on Audit Fees in a Multi-Country and Industry Setting. EMAJ: Emerging Markets Journal, 11(2), pp.25-35.
Kajola, S.O., Olabisi, J., Tonade, A.A. and Agbatogun, T.O. (2022). Determinants of audit fees in Nigerian banks. Accounting and taxation review, 6(1), pp.29-45.
Waresul Karim, A.K.M. and Hasan, T. (2012). The market for audit services in Bangladesh. Journal of Accounting in Emerging economies, 2(1), pp.50-66.
Karim, A.W. and Moizer, P. (1996). Determinants of audit fees in Bangladesh. The International Journal of Accounting, 31(4), pp.497-509.
Khan, A., Muttakin, M.B. and Siddiqui, J. (2015). Audit fees, auditor choice and stakeholder influence: Evidence from a family-firm dominated economy. The British Accounting Review, 47(3), pp.304-320.
Khan, A.R., Hossain, D.M. and Siddiqui, J. (2011). Corporate ownership concentration and audit fees: The case of an emerging economy. Advances in Accounting, 27(1), pp.125-131.
Khan, H.U.Z. (2010). The effect of corporate governance elements on corporate social responsibility (CSR) reporting: Empirical evidence from private commercial banks of Bangladesh. International Journal of Law and Management, 52(2), pp.82-109.
Kikhia, H. (2014). Determinants of audit fees: Evidence from Jordan. Accounting and Finance Research, 4(1), 42-53.
Kikhia, H. Y. (2014). Board characteristics, audit committee characteristics, and audit fees: Evidence from Jordan. International Business Research, 7(12), 98-110. DOI:10.5539/ibr.v7n12p98
Liu, C. and Xu, C. (2021). The effect of audit engagement partner professional experience on audit quality and audit fees: early evidence from Form AP disclosure. Asian Review of Accounting.
Liu, S. (2017). An empirical study: Auditors’ characteristics and audit fee. Open Journal of Accounting, 6(2), pp.52-70.
Mohammed, A.M., Joshua, O. and Ahmed, M.N. (2018). Audit fees and audit quality: A study of listed companies in the downstream Sector of Nigerian petroleum industry. Humanities and Social Sciences Letters, 6(2), pp.59-73.
Naser, K. and Nuseibeh, R. (2007). Determinants of audit fees: empirical evidence from an emerging economy. International Journal of Commerce and Management.
Nelson, S. P. and Mohamed-Rusdi, N.F. (2015). Ownership structures influence on audit fee. Journal of Accounting in Emerging Economies.
Oladejo, M.O., Jk, O. and Yinus, S.O. (2020). External Audit Quality and Users Confidence in Financial Reports: Evidence from Nigeria Deposit Money Banks. International Journal of Technology and Management, 5(1), p.16.
Olutokunbo, O. T., Yisa, A., & Abdullahi, J. S. (2020). Corporate characteristics, audit fees and the Nigerian corporate environment: A panel data approach. European Journal of Accounting, Auditing and Finance Research, 8(9), 78-97.
Othman, R., Thani, A.M. and Ghani, E.K. (2009). Determinants of Islamic social reporting among top Shariah-approved companies in Bursa Malaysia. Research Journal of International Studies, 12(12), pp.4-20.
Palmrose, Z.V. (1986). Audit fees and auditor size: Further evidence. Journal of accounting research, pp.97-110.
Paul, S.C., Islam, M.R., Bhowmik, P.K. and Baser, A.A., Reasons for Low Audit Fees: Evidence from Bangladesh.
Pourheidari, O. and Golmohammadi, M. (2022). Stakeholder management and audit fees. Iranian Journal of Management Studies.
Reza, M.M.U. (2021). Factors Affecting the Audit Quality in Bangladesh. International Fellowship Journal of Interdisciplinary Research, 1(2), pp.113-126.
Sandra, W.M. and Patrick, P.H. (1996). The deteminants of audit fees in HongKong: An empirical study. Asian review of Accounting, 4(2), pp.32-50.
Santhosh, N., & Ganesh, R. S. (2020). Determinants of audit fees: Evidence from companies listed in the industrial sector of Muscat securities market. Journal of Critical Reviews, 7(3), 33-36
Sattar, S. (2018). Independent directors and good corporate governance. The Daily Star, June 12, 2018. Retrieved 12 June, 2019 from https://www.thedailystar.net/law-our-rights/law vision/independent-directors-and-good-corporate-governance-1589872
SHAKHATREH, M.Z. and ALSMADI, S.A. (2021). Determinants of Audit Fees and the Role of the Board of Directors and Ownership Structure: Evidence from Jordan. The Journal of Asian Finance, Economics and Business, 8(5), pp.627-637.
Thinggaard, F. and Kiertzner, L. (2008). Determinants of audit fees: Evidence from a small capital market with a joint audit requirement. International journal of auditing, 12(2), pp.141-158.
Vermeer, T.E., Raghunandan, K. and Forgione, D.A. (2009). Audit fees at US non‐profit organizations. Auditing: A Journal of Practice & Theory, 28(2), pp.289-303.
Yatim, P., Kent, P. and Clarkson, P. (2006). Governance structures, ethnicity, and audit fees of Malaysian listed firms. Managerial Auditing Journal, 21(7), pp.757-782.
Abdullah, H. and Valentine, B. (2009). Fundamental and ethics theories of corporate governance. Middle Eastern Finance and Economics, 4(4), pp.88-96.
Abdul-Rahman, O.A., Benjamin, A.O. and Olayinka, O.H. (2017). Effect of audit fees on audit quality: Evidence from cement manufacturing companies in Nigeria. European Journal of Accounting, Auditing and Finance Research, 5(1), pp.6-17.
Alanezi, F. and Alfraih, M. (2016). The awareness of external auditors and the management of Kuwaiti listed companies on determinants of audit fees: an exploratory study. International Journal of Business and Management, 11(1), p.108.
Alhababsah, S. and Yekini, S. (2021). Audit committee and audit quality: An empirical analysis considering industry expertise, legal expertise, and gender diversity. Journal of International Accounting, Auditing, and Taxation, 42, p.100377.
Ashan, M.M. and Shahneaz, M.A. (2015). The Effects of Prohibition of Non-Audit Services on Audit Quality and Fees: A Study on Bangladesh. Research Journal of Finance and Accounting, 6(9), pp.216-224.
Ayoola, T.J. (2022). Audit fees, audit seasonality, and audit quality in Nigeria: A mediation analysis. Journal of Financial Reporting and Accounting, (ahead-of-print).
Bota-Avram, C., Grosanu, A., Rachisan, P. R., & Ivan, R. O. (2018). Determinants of audit fees: Empirical evidence from Romanian public-interest entities. 2nd International Scientific Conference. DOI: 10.31410.itema.2018.599
Bozec, R., & Dia, M. (2017). Monitoring function of the board and audit fees: Contingent upon ownership concentration. International Journal of Accounting & Information Management, 25(1), 70-90. DOI: 10.1108/IJAIM-05-2016-0054
Cahan, S.F. and Sun, J. (2015). The effect of audit experience on audit fees and audit quality. Journal of Accounting, auditing & finance, 30(1), pp.78-100.
Carcello, J.V., Hermanson, D.R., Neal, T.L. and Riley Jr, R.A. (2002). Board characteristics and audit fees. Contemporary accounting research, 19(3), pp.365-384.
Carson, E., Fargher, N., Simon, D.T. and Taylor, M.H. (2004). Audit fees and market segmentation–further evidence on how client size matters within the context of audit fee models. International Journal of Auditing, 8(1), pp.79-91.
Cobbin, P.E. (2002). International dimensions of the audit fee determinants literature. International Journal of Auditing, 6(1), pp.53-77.
Dabor, A. O., & Ohonba, N. (2014). Determinants of audit fee in Nigerian banking sector. West African Journal of Business and Management Sciences, 4(1), 95-105.
Dando, N. and Swift, T. (2003). Transparency and assurance minding the credibility gap. Journal of Business Ethics, 44(2), pp.195-200.
Deegan, C., Rankin, M. and Tobin, J. (2002). An examination of the corporate social and environmental disclosures of BHP from 1983‐1997: A test of legitimacy theory. Accounting, Auditing & Accountability Journal.
Efron, B. (1988). Logistic regression, survival analysis, and the Kaplan-Meier curve. Journal of the American statistical Association, 83(402), pp.414-425.
Egbunike, C.F., Igbinovia, I.M., Okafor, K.J. and Mmadubuobi, L.C. (2023). Residual audit fee and real income smoothing: evidence from quoted non-financial firms in Nigeria. Asian Journal of Accounting Research, 8(1), pp.66-79.
Ghosh, T. (2019). Corporate Governance and Audit Fees Evidence from Bangladeshi Listed Banks and NBFIs. Corporate Governance, 3(1).
Griffin, P.A., Lont, D.H. and Sun, Y. (2008). Corporate governance and audit fees: Evidence of countervailing relations. Journal of Contemporary Accounting & Economics, 4(1), pp.18-49.
Griffin, P.A., Lont, D.H. and Sun, Y. (2010). Agency problems and audit fees: further tests of the free cash flow hypothesis. Accounting & Finance, 50(2), pp.321-350.
Habib, A., Jiang, H., & Zhou, D. (2015). Related party transaction and audit fees: Evidence from China. Journal of International Research, 14(1), 1-67.
Haque, T., Afroze, S. and Tuz-Zohra, F. (2019). Impact of corporate governance on audit fees and audit quality: A Study in insurance industry in Bangladesh. The cost and Management, 47(2), pp.4-11.
Hassan, Y. and Naser, K. (2013). Determinants of audit fees: Evidence from an emerging economy.
Hossain, M. N., & Sobhan, R. (2019). Determinants of audit fees: Evidence from pharmaceutical and chemical industry of Bangladesh. International Journal of Trend in Scientific Research and Development, 4(1), 814- 821.Available online: www. Ijtsrd.com
Inchausti, A. G. (1997). The influence of company characteristics and accounting regulation on information disclosed by Spanish firms. European Accounting Review, 6(1), 45-68.DOI:10.1080/096381897336863
Jayeola, O., Olugboyega, K.S., Adekunle, A.M. and Olympus, O.O. (2020). Determinants of audit quality: evidence from Nigerian listed insurance companies. Вестник Волгоградского государственного университета. Серия 3: Экономика. Экология, 22(2), pp.182-192.
Jizi, M., & Nehme, R. (2018). Board monitoring and audit fees: The moderating role of CEO/chair dual roles. Managerial Auditing Journal, 33(2), 217-243.DOI: 10.1108/MAJ-10-2016-1464
Joshi, P., & AL‐Bastaki, H. (2000). Determinants of audit fees: evidence from the companies listed in Bahrain. International journal of auditing, 4(2), 129-138. DOI:10.1111/1099-1123.00308
Joshi, P.L., Deshmukh, A. and Azibi, J. (2021). The Effects of Internal Audit, Audit Committee and Firm Characteristics on Audit Fees in a Multi-Country and Industry Setting. EMAJ: Emerging Markets Journal, 11(2), pp.25-35.
Kajola, S.O., Olabisi, J., Tonade, A.A. and Agbatogun, T.O. (2022). Determinants of audit fees in Nigerian banks. Accounting and taxation review, 6(1), pp.29-45.
Waresul Karim, A.K.M. and Hasan, T. (2012). The market for audit services in Bangladesh. Journal of Accounting in Emerging economies, 2(1), pp.50-66.
Karim, A.W. and Moizer, P. (1996). Determinants of audit fees in Bangladesh. The International Journal of Accounting, 31(4), pp.497-509.
Khan, A., Muttakin, M.B. and Siddiqui, J. (2015). Audit fees, auditor choice and stakeholder influence: Evidence from a family-firm dominated economy. The British Accounting Review, 47(3), pp.304-320.
Khan, A.R., Hossain, D.M. and Siddiqui, J. (2011). Corporate ownership concentration and audit fees: The case of an emerging economy. Advances in Accounting, 27(1), pp.125-131.
Khan, H.U.Z. (2010). The effect of corporate governance elements on corporate social responsibility (CSR) reporting: Empirical evidence from private commercial banks of Bangladesh. International Journal of Law and Management, 52(2), pp.82-109.
Kikhia, H. (2014). Determinants of audit fees: Evidence from Jordan. Accounting and Finance Research, 4(1), 42-53.
Kikhia, H. Y. (2014). Board characteristics, audit committee characteristics, and audit fees: Evidence from Jordan. International Business Research, 7(12), 98-110. DOI:10.5539/ibr.v7n12p98
Liu, C. and Xu, C. (2021). The effect of audit engagement partner professional experience on audit quality and audit fees: early evidence from Form AP disclosure. Asian Review of Accounting.
Liu, S. (2017). An empirical study: Auditors’ characteristics and audit fee. Open Journal of Accounting, 6(2), pp.52-70.
Mohammed, A.M., Joshua, O. and Ahmed, M.N. (2018). Audit fees and audit quality: A study of listed companies in the downstream Sector of Nigerian petroleum industry. Humanities and Social Sciences Letters, 6(2), pp.59-73.
Naser, K. and Nuseibeh, R. (2007). Determinants of audit fees: empirical evidence from an emerging economy. International Journal of Commerce and Management.
Nelson, S. P. and Mohamed-Rusdi, N.F. (2015). Ownership structures influence on audit fee. Journal of Accounting in Emerging Economies.
Oladejo, M.O., Jk, O. and Yinus, S.O. (2020). External Audit Quality and Users Confidence in Financial Reports: Evidence from Nigeria Deposit Money Banks. International Journal of Technology and Management, 5(1), p.16.
Olutokunbo, O. T., Yisa, A., & Abdullahi, J. S. (2020). Corporate characteristics, audit fees and the Nigerian corporate environment: A panel data approach. European Journal of Accounting, Auditing and Finance Research, 8(9), 78-97.
Othman, R., Thani, A.M. and Ghani, E.K. (2009). Determinants of Islamic social reporting among top Shariah-approved companies in Bursa Malaysia. Research Journal of International Studies, 12(12), pp.4-20.
Palmrose, Z.V. (1986). Audit fees and auditor size: Further evidence. Journal of accounting research, pp.97-110.
Paul, S.C., Islam, M.R., Bhowmik, P.K. and Baser, A.A., Reasons for Low Audit Fees: Evidence from Bangladesh.
Pourheidari, O. and Golmohammadi, M. (2022). Stakeholder management and audit fees. Iranian Journal of Management Studies.
Reza, M.M.U. (2021). Factors Affecting the Audit Quality in Bangladesh. International Fellowship Journal of Interdisciplinary Research, 1(2), pp.113-126.
Sandra, W.M. and Patrick, P.H. (1996). The deteminants of audit fees in HongKong: An empirical study. Asian review of Accounting, 4(2), pp.32-50.
Santhosh, N., & Ganesh, R. S. (2020). Determinants of audit fees: Evidence from companies listed in the industrial sector of Muscat securities market. Journal of Critical Reviews, 7(3), 33-36
Sattar, S. (2018). Independent directors and good corporate governance. The Daily Star, June 12, 2018. Retrieved 12 June, 2019 from https://www.thedailystar.net/law-our-rights/law vision/independent-directors-and-good-corporate-governance-1589872
SHAKHATREH, M.Z. and ALSMADI, S.A. (2021). Determinants of Audit Fees and the Role of the Board of Directors and Ownership Structure: Evidence from Jordan. The Journal of Asian Finance, Economics and Business, 8(5), pp.627-637.
Thinggaard, F. and Kiertzner, L. (2008). Determinants of audit fees: Evidence from a small capital market with a joint audit requirement. International journal of auditing, 12(2), pp.141-158.
Vermeer, T.E., Raghunandan, K. and Forgione, D.A. (2009). Audit fees at US non‐profit organizations. Auditing: A Journal of Practice & Theory, 28(2), pp.289-303.
Yatim, P., Kent, P. and Clarkson, P. (2006). Governance structures, ethnicity, and audit fees of Malaysian listed firms. Managerial Auditing Journal, 21(7), pp.757-782.
Published
2025-05-07
How to Cite
KARIM, Md. Rezaul; SHARIF, Md. Jamil; KHASNOBISH, Tama Lika.
Determinants of Minimum Audit Fee Compliance:.
Journal of Accounting, Business and Management (JABM), [S.l.], v. 32, n. 1, p. 114-130, may 2025.
ISSN 2622-2167.
Available at: <https://journal.stie-mce.ac.id/index.php/jabminternational/article/view/1223>. Date accessed: 29 may 2025.
doi: https://doi.org/10.31966/jabminternational.v32i1.1223.
Section
Articles
