Determinants of External Auditors’ Fee: In the Case of Banking and Insurance Industries of Ethiopia
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Date
2019-01
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Addis Ababa University
Abstract
The major objective of the study is to evaluate the Determinants of External Auditor Fee in
banking and insurance industries of Ethiopia from 2012-2016 years. The research methodology
is Quantitative research approach .this approach is used since it helps to conduct systematic
empirical study of observable phenomena via statistical or mathematical techniques. , data was
taken from NBE for which regressions was used to the analysis of study. The finding shows that
aspect of corporate or clients sizes triggers 52 .3% positive change in the process of deciding its
fee for the auditor while experience of the auditor triggers by 11.12% positive change in the
decision of auditors fee through placing second as a determining factor . The finding shows that
aspect of Auditor size is that it portrayed by 8.66% positively which is investigated as the strong
relationship between audite size, and audit pricing, and determined that audit size is positively
associated with audit fees and the clients expects higher quality audits from relatively
experienced and large sized audit firms . The study found that an increase in market share of the
audit firm leads on an average increase 3.99% increase in the revenue of the audit firm .The
study found that an increase in the Client Profitability between 2012 and 2016 lead to a
significant increase by 8.5 % in real audit fees. On the other hand, increase in the liquidity risk
has a significant negativity indicated by 31.9% in real external audit fees .The negatively signed
relationship between liquidity risk and Audit Fee shows that there is positive relationship
between liquidity risk and Audit fee. The study shows increase of the Client Complexity
significantly contributed to increase Auditor fee by 2.1%.similarly,however it was found
insignificant with audit fee relation an increase Efficiency of the client is considered an
important attribute that increase the determining amount of audit fees positively indicated by
7.67% in real audit fees. This implies that the efficient companies have the ability to bear
additional charges for audit work due to their internal Efficiency. Therefore, Efficiency of the
client has a positive correlation with the audit fees.
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Keywords
Auditee, Audit fee, Client