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Business & Economy Related Topics Essay

8901 words - 36 pages

Determinants Of Audit Fees: Empirical Evidence From Emerging Economy
Kamal Naser* Hamed Abdullhameed** & Rana Nuseibeh***


This study investigates the structure of audit fees in an emerging economy, Jordan. Data were collected from a sample of companies listed on the Amman Stock Exchange that forms 90% of the total population and fairly presents all industrial sectors within the economy. Consistent with previous research, the results of the analysis revealed that corporate size, status of the audit firm, industry type, degree of corporate complexity and risk are the main determinants of audit fees in the Jordanian environment. Unlike previous studies, however, variables such ...view middle of the document...

UK: Taylor and Baker, 1981; Taffler and Ramalinggam, 1982; Haskins and Williams, 1988; Brinn et al, 1991; Chan et al, 1993; Brinn et al., 1994; Pong and Whittington, 1994; O’Sullivan and Diacon, 1994; Che et al., 1996; Gregory and Collier, 1996; Ezzamel et al, 1996; Iyer and Iyer, 1996; O’Sullivan and Diacon, 2000; Peel and Clatworthy, 2001; Chung and Narasimhan, 2002; Ezzamel, et al., 2002; Neimi, 2002; O’Sullivan and Diacon, 2002; Simon and Taylor, 2002. Nevertheless, a limited number of studies have been undertaken that relate to emerging economies1 (See for example: Bahrain: Joshi and AlBastaki, 2000; Bangladesh: Waresul Karim and Moizer, 1996. Hong Kong: Simon et al., 1992; Lee, 1996; Sandra and Patrick, 1996; Rose, 1999. India: Simon et al, 1986; Dugar Rahmanan and Simon, 1995. Malaysia: Simon et al., 1992; Che Ahmad and Derashid, 1996; Rose, 1999. Pakistan: Simon and Taylor, 1997; Singapore: Low et al, 1990; Simon et al., 1992. South Korea: Taylor et al., 1999; South Africa: Simon, 1995). Apart from the study undertaken by Joshi and Al-Bastaki (2000), no other research has been undertaken that provides empirical


cientific Journal of Administrative Development Vol.5 I.A.D. 2007


cientific Journal of Administrative Development Vol.5 I.A.D. 2007

evidence on factors that impact audit fees in the Middle East. This study is therefore important as it provides, for the first time, evidence on the determinants of audit fees in Jordan. The choice of Jordan is for a number of reasons. First, Jordan enjoys a unique geographic location with stable political environment and runs a free market economy. Second, it offers an attractive incentive package and provides an attractive climate to foreign investors. Unlike many Arab countries, Jordan adopts an open economic policy where both Arab and Non-Arab foreign investors are openly permitted to invest in most companies listed on the Amman Stock Exchange (ASE). For example, in March 2002, total foreign investment amounted to 20 per cent of total trading volume of shares which two fifths was owned by Arab foreign investors and three fifths owned by Non-Arab investors (ASE, 2002). In the light of this, the structure and work of audit firms is of crucial importance to these investors. Third, this has coincided with the ongoing privatisation programme adopted by the government in the early 1990s and the signing of agreements with the European Union (EU) and the World Trade Organisation (WTO). Fourth, unlike many Arab countries, since the early 1990s Jordan has applied both international accounting and auditing standards (IASs). As a result, a number of the big international audit firms entered the Jordanian audit market either on their own or as partners to local audit firms. As many as 90 per cent of the companies on the Amman Stock Exchange are audited by large local audit firms that are affiliated to the “big 5” international firms. This is also likely to impact levels of audit...

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