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Determinants of audit fees in Nepalese commercial banks / Balbidhya Pandeya
Title : Determinants of audit fees in Nepalese commercial banks Material Type: printed text Authors: Balbidhya Pandeya, Author Publication Date: 2019 Pagination: 106p. Size: GRP/Thesis Accompanying material: 14/B Languages : English Abstract: The audit fee is the economic compensation for auditors who provide audit services, which are an agency fee according to certain standards. The audit fee comprises the total cost of the audit through the total audit work, the risk compensation and the profit demand. During the authentic audit work, the audit fee stimuli not only audit quality but also the development of accounting firms and the audit industry. The determination of the audit fees is based on the contract between the auditor and the auditee in accordance with time spent on the audit process, the service required, and the number of staff needed for the audit process. It should be mentioned that audit fees are normally determined before starting the audit process. There is a growing trend in recent years in accounting about discussing the issue of audit fees, how do auditors determine the amount of fees required from the auditee. This is an important question that needs an answer. Prior research tried to examine whether determining the audit fees is affected by the audit company attributes (like size, reputation, experience, competition, industry specialization and whether it is from the big four) or by the client’s company characteristics (auditee attributes like size, complexity risk, and profitability).
The study attempts to examine the determinants of audit fees in the Nepalese commercial banks. Audit fees is the dependent variables. The independent variables are profitability, auditor expertise, complexity, leverage and bank size. The study is based on secondary data of 20 commercial banks with 200 observations for the period of 2008/09 to 2017/18. The secondary data and information have been collected from annual reports of selected commercial banks. The regression models are estimated to test the significance and impact of different variables on audit fees in Nepalese commercial banks. The findings of the paper are largely original in the area of audit fees of Nepalese banking.
The result shows that average audit fee is highest for RBB (Rs.24.18 lakhs) and lowest for EBL (Rs. 2.74 lakhs), average leverage is highest for RBB (1 times) and lowest for NICA (0.48 times), average audit committee members is highest for SRBL (4 members) and lowest for EBL(2 members), average complexity is highest for ADBL (239 branches) and lowest for SCBL (17 branches) and average bank size is highest for RBB (121 billion) and lowest for NBB (25.4 billion).
The descriptive statistics shows that the audit fees ranges from a minimum of Rs.1.02 lakhs to a maximum of Rs.39.51 lakhs to an average of Rs.8.11 lakhs. Similarly, the profitability ranges from minimum of 0.04 percent to a maximum of 4.01 percent leading to an average of 1.54 percent. Audit committee members varies from a minimum of 2 members to a maximum of 6 members leading to an average of 3 members. Similarly, complexity varies from minimum of 2 branches to a maximum of 249 branches leading to an average of 60 branches. Leverage ranges from a minimum of 0.02 times to a maximum of 1.20 times leading to an average of 0.87 times. Bank size varies from a minimum of Rs.27 billion to a maximum of Rs.258.66 billion leading to an average of Rs.56.72 billion.
The result shows profitability has a positive relationship with audit fees. It indicates that increase in bank profitability leads to increase in audit fees. The results also show that audit committee members has a negative relationship with audit fees. It indicates that increase in members of internal audit committee leads to decrease audit fees. Similarly, complexity has a positive and significant relationship with audit fees. It reveals that increase in number of banks subsidiaries leads to increase audit fees. Likewise, leverage has a positive relationship with audit fees. It indicates that increase in banks risk leads to increase audit fees. Similarly, bank size has positive and significant relationship with audit fees. It indicates that increase in bank size leads to increase in audit fees.
The regression analysis shows that beta coefficients for profitability, audit committee members and leverage are positive with audit fees. The result also shows that the beta coefficients for profitability are significant at 5 percent level of significance. This indicates that profitability, audit committee members and leverage has positive effect on audit fees. Similarly, the beta coefficients for bank size and complexity are positive with audit fees. It shows coefficients for bank size, and complexity has positive impact on audit fees. The result also shows that the beta coefficients for bank size and complexity are significant at 1 percent level of significance.
Determinants of audit fees in Nepalese commercial banks [printed text] / Balbidhya Pandeya, Author . - 2019 . - 106p. ; GRP/Thesis + 14/B.
Languages : English
Abstract: The audit fee is the economic compensation for auditors who provide audit services, which are an agency fee according to certain standards. The audit fee comprises the total cost of the audit through the total audit work, the risk compensation and the profit demand. During the authentic audit work, the audit fee stimuli not only audit quality but also the development of accounting firms and the audit industry. The determination of the audit fees is based on the contract between the auditor and the auditee in accordance with time spent on the audit process, the service required, and the number of staff needed for the audit process. It should be mentioned that audit fees are normally determined before starting the audit process. There is a growing trend in recent years in accounting about discussing the issue of audit fees, how do auditors determine the amount of fees required from the auditee. This is an important question that needs an answer. Prior research tried to examine whether determining the audit fees is affected by the audit company attributes (like size, reputation, experience, competition, industry specialization and whether it is from the big four) or by the client’s company characteristics (auditee attributes like size, complexity risk, and profitability).
The study attempts to examine the determinants of audit fees in the Nepalese commercial banks. Audit fees is the dependent variables. The independent variables are profitability, auditor expertise, complexity, leverage and bank size. The study is based on secondary data of 20 commercial banks with 200 observations for the period of 2008/09 to 2017/18. The secondary data and information have been collected from annual reports of selected commercial banks. The regression models are estimated to test the significance and impact of different variables on audit fees in Nepalese commercial banks. The findings of the paper are largely original in the area of audit fees of Nepalese banking.
The result shows that average audit fee is highest for RBB (Rs.24.18 lakhs) and lowest for EBL (Rs. 2.74 lakhs), average leverage is highest for RBB (1 times) and lowest for NICA (0.48 times), average audit committee members is highest for SRBL (4 members) and lowest for EBL(2 members), average complexity is highest for ADBL (239 branches) and lowest for SCBL (17 branches) and average bank size is highest for RBB (121 billion) and lowest for NBB (25.4 billion).
The descriptive statistics shows that the audit fees ranges from a minimum of Rs.1.02 lakhs to a maximum of Rs.39.51 lakhs to an average of Rs.8.11 lakhs. Similarly, the profitability ranges from minimum of 0.04 percent to a maximum of 4.01 percent leading to an average of 1.54 percent. Audit committee members varies from a minimum of 2 members to a maximum of 6 members leading to an average of 3 members. Similarly, complexity varies from minimum of 2 branches to a maximum of 249 branches leading to an average of 60 branches. Leverage ranges from a minimum of 0.02 times to a maximum of 1.20 times leading to an average of 0.87 times. Bank size varies from a minimum of Rs.27 billion to a maximum of Rs.258.66 billion leading to an average of Rs.56.72 billion.
The result shows profitability has a positive relationship with audit fees. It indicates that increase in bank profitability leads to increase in audit fees. The results also show that audit committee members has a negative relationship with audit fees. It indicates that increase in members of internal audit committee leads to decrease audit fees. Similarly, complexity has a positive and significant relationship with audit fees. It reveals that increase in number of banks subsidiaries leads to increase audit fees. Likewise, leverage has a positive relationship with audit fees. It indicates that increase in banks risk leads to increase audit fees. Similarly, bank size has positive and significant relationship with audit fees. It indicates that increase in bank size leads to increase in audit fees.
The regression analysis shows that beta coefficients for profitability, audit committee members and leverage are positive with audit fees. The result also shows that the beta coefficients for profitability are significant at 5 percent level of significance. This indicates that profitability, audit committee members and leverage has positive effect on audit fees. Similarly, the beta coefficients for bank size and complexity are positive with audit fees. It shows coefficients for bank size, and complexity has positive impact on audit fees. The result also shows that the beta coefficients for bank size and complexity are significant at 1 percent level of significance.
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Barcode Call number Media type Location Section Status 604/D BAL Thesis/Dissertation Uniglobe Library Philosophy & Psychology Available