Lowballing of audit fees: the consequences and importance of the client

Document Type : Research Paper

Authors

1 Associate Professor of Accounting Department, Lorestan University

2 MSc. Stu in accounting, Faculty of Management and Economic, Lorestan University, Iran

10.22051/jaasci.2024.46874.1851

Abstract

Abstract
Purpose: The purpose of this research is to examine the role of the client importance in audit fees lowballing in TSE companies.
Method: The data related to 95 TSE companies the between 2010 and 2020 were extracted and the combined data regression model was used to test the research hypotheses.

Findings: Based on the research results, the first hypothesis shows the fact that there is a significant relationship between the client's credit and the audit fee lowballing. In the second hypothesis, the effect of the audit firm size on the relationship between the client credit and the audit fee lowballing has been improved. In the third research hypothesis, the effect of audit fee lowballing on the e audit fee change in the following years of the audit has become improved. Finally, the fourth research hypothesis showed that the audit fee lowballing has a significant impact on audit quality in the audit following years.

Conclusion: If the clients consider the increase in the audit fee as an audit quality signal, they may show less resistance to the fee increasing, and when the decrease in the fee is appropriate, the clients demand to reduce the fee will be less than expected. The audit fee lowballing is a strong incentive to keep the client, in order to maintain the future stable income flow.

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History

  • Receive Date: 16 April 2024
  • Revise Date: 08 November 2024
  • Accept Date: 04 July 2024

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