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The Determinants Of Audit Fees: Some Empirical Models

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  • C.M. Pong
  • G. Whittington

Abstract

This paper proposes a model of audit fee determination based upon size and other characteristics of the auditee and the auditor, and upon whether there has been a recent change of auditor (which might lead to a low‐balling effect). A novel feature of the model is that auditee size is measured in two dimensions, sales and assets, and is allowed to have a quadratic relationship with audit fee. The model was estimated for a sample of large listed UK companies for the years 1981 to 1988. The results support the low‐balling hypothesis and also provide insights into the distinctive role of the Big 8 firms in the audit market.

Suggested Citation

  • C.M. Pong & G. Whittington, 1994. "The Determinants Of Audit Fees: Some Empirical Models," Journal of Business Finance & Accounting, Wiley Blackwell, vol. 21(8), pages 1071-1095, December.
    • Handle: RePEc:bla:jbfnac:v:21:y:1994:i:8:p:1071-1095
    DOI: 10.1111/j.1468-5957.1994.tb00365.x
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