This study of companies listed on the stock exchanges in Tanzania, Kenya, Rwanda and Uganda has uncovered oligopolistic audit market structure. A total of 78 listed companies (74% of population) was analysed using audit fees’ data from 2013-2017. The study revealed that Big4 had a statistically positive influence on the audit fees paid by the listed companies. Non_Big4 as a bloc had a negative influence as some of the firms experienced reduction in audit fees after taking over from Big4. The Herfindahl-Hirschman Index (HHI) was 0.94 while Concentration Ratio (CR4 – clients) which measures client market concentration of the Big4 was 86% and CR4- audit fees was much higher at 96% with PwC and KPMG the top two. Only 5% of variation in audit fees could be attributed to variation in stock exchange. Audit fees increased by a compound annual growth rate of 8% but Non_Big4 remain marginalized and forced into fee discounting to retain the few clients.
We ascertain the effects of International Financial Reporting Standards (IFRS) adoption on the audit fees payable by listed Deposit Money Banks (DMB) in Nigeria. Data for the study was collected from the annual reports of the 15 listed DMBs in Nigeria. The study period spanned two accounting standard regimes: the Nigerian Statements of Accounting Standards (SAS) (2009- 2011) and the IFRS (2012-2014). We analysed the effect of IFRS adoption on audit fees in Nigeria in two ways: first we compared audit fees and the known determinants (audit task complexity and reporting quality) under the two standards regimes using a paired-sample t-test. Second, we employed multivariate analysis to examine and explain the combined effect of audit task complexity, financial reporting quality and IFRS in explaining the change in audit fee following IFRS adoption. We found that audit fees are significantly higher under the IFRS than under the SAS; we also found that IFRS adoption has significantly increased audit complexity and improved financial reporting quality. We conclude that less than 50% of the significant increase in audit fees following IFRS adoption is explained by IFRS task complexities. We recommend further research to ascertain the other factors that could have led to the significant increase in audit fees of DMBs. Lastly, given that the quality of financial reporting increased with IFRS adoption recommend that accountants, regulatory authorities, professional bodies and all other parties in financial reporting chain should deepen their knowledge of IFRS.
This study analyses association between audit risk and audit fees and also studied the influences of industry differences on audit pricing-risk association. Strong empirical evidence has found to suggest that the inherent risk and control risk have positive influence on audit fees. The sample of empirical research comprises a total of 507 listed companies, 260 observations in the United States in 2007 fiscal year and separated into two sub-samples, financial and non-financial firms. Client financial distress factor was tested with the help of Z-score model. The analysis shows that in the similar level of total assets financials are charged lower audit fees than non-financial firms and compared with financials, the audit fees for nonfinancial firms are more sensitive to the financial indicators. It also concluded that the auditors did not seem to take financial firms business risk into consideration when decided audit fees as there is a positive relation between audit fees and companies’ solvency and the possibility of bankruptcy. Auditors considered not only the non-financial firms’ profitability, but also the liquidity, activity, solvency and possibility of bankrupt when they decide audit fees.