Corporate Finance

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Browsing Corporate Finance by Subject "Audit Fee"

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    Determinants of Audit Fee Pricing: A Case Study of Ethiopian Audit Firms
    (Addis Ababa University, 2025-09) Birhanu Zenu; Tesfa Nega (PhD)
    This study investigates the key determinants influencing audit fee structures among audit firms operating in Ethiopia. In the context of growing expectations for accountability and transparency within financial reporting, the research seeks to provide empirical evidence on how various client-specific and auditor-related factors impact audit pricing decisions. A structured questionnaire was distributed to a sample of 145 audit professionals, and a quantitative research approach was adopted for data analysis. The methodology involved the application of descriptive statistics, correlation analysis, and multiple linear regression to assess the relationship between audit fees and five main variables: client size, client risk, client complexity, auditor reputation, and market competition. The analysis yielded significant findings, indicating that client risk, complexity, auditor reputation, and competitive market forces have a statistically significant and positive effect on audit fees. These results suggest that audit firms in Ethiopia systematically adjust their pricing based on higher levels of perceived risk, operational complexity, reputational strength, and market competitiveness. Although client size demonstrated a positive correlation with audit fees, its influence was not statistically significant within the model. The robustness of the regression results was confirmed through diagnostic tests, all of which indicated compliance with the classical assumptions of linear regression ensuring the reliability and validity of the statistical inferences. These findings align with existing international research on audit fee determinants, thereby reinforcing their relevance in the Ethiopian context. The study provides practical implications for various stakeholders, including audit firms, regulators, and policymakers. Specifically, it emphasizes the need for audit firms to adopt more structured, transparent, and risk-based fee-setting practices. Additionally, it highlights the importance of regulatory guidance that considers market conditions and audit complexity to promote fair pricing and audit quality. Future research is encouraged to broaden the scope by incorporating additional influencing variables and employing longitudinal or panel data methods to capture trends and changes in audit pricing over time.