The Impact of Abnormal Audit Fees on Audit Quality: A Study of ASEAN Countries


This study investigates the impact of abnormal audit fees on audit quality. An abnormal audit fee is the difference between the actual fee paid by the auditee to the external auditor and the normal fee. If the actual audit fee is above the normal audit fee, it is called a positive abnormal audit fee (premium) and if the actual audit fee is below the normal audit fee, it is called a negative abnormal audit fee (discount). The samples for this study were 3,694 selected companies from Indonesia, Malaysia, Singapore, the Philippines, and Thailand. Data were analyzed using regression analysis and it was found that positive abnormal audit fees could decrease the audit quality. This is because of the economic arrangement between the auditors and the clients as the auditor will be more tolerant towards the earnings management carried out by the client. On the other hand, negative abnormal audit fees have an insignificant relationship with the audit quality, which means if auditors are paid below the normal fees, they have no incentive to compromise the audit quality. Because audit fees can affect audit quality, regulators need to make policies so that audit fees paid to the external auditors should not be more than the normal fees.

Keywords: audit quality, audit fees, negative abnormal audit fees, positive abnormal audit fees, abnormal working capital accruals

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