Main Article Content
Abstract
Purpose: This study explores the complexity of audit fee negotiations and their impact on audit quality and independence. The study also highlights factors influencing the negotiation process, such as client characteristics, industry dynamics, and regulatory requirements.
Research Design and Methodology: This study applies a systematic approach to analyze and synthesize qualitative data from scholarly articles and other relevant sources related to audit fee negotiations.
Findings and Discussion: The results show that client size, complexity, and industry competition are essential in determining audit fees. Auditors should customize fee structures based on client-specific needs and industry sector dynamics. In addition, transparency, communication, and trust-building are essential in creating constructive negotiations. This research also reveals the potential impact of fee negotiations on audit quality and independence.
Findings and Discussion: This study's implications guide auditors, clients, regulators, and other stakeholders in effectively navigating the fee negotiation process. It aims to promote fairness, transparency, and integrity in the audit profession and maintain audit quality and independence.
Implications: This study's implications guide auditors, clients, regulators, and other stakeholders in effectively navigating the fee negotiation process. It aims to promote fairness, transparency, and integrity in the audit profession and maintain audit quality and independence.
Keywords
Article Details

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References
- Abbott, L. J., Parker, S., & Peters, G. F. (2003). Audit fees, non-audit fees, and auditor reporting on preregulation earnings quality: Evidence from Arthur Andersen. Auditing: A Journal of Practice & Theory, 22(1), 51-69. https://doi.org/10.2308/aud.2003.22.1.51
- Awadallah, A. A. (2018). Negotiating audit fees: A study of auditor-client negotiations. Journal of Accounting and Finance, 17(6), 50-65. https://doi.org/10.1016/j.jac.2017.12.004
- Chan, K. H., Chen, C. R., Cheng, L. T. W., & Elder, R. J. (2006). The effect of legal environment on voluntary disclosure: Evidence from management earnings forecast issued in U.S. and Hong Kong. Journal of International Accounting, Auditing and Taxation, 15(2), 170-189. https://doi.org/10.1016/j.intaccaudtax.2006.07.002
- Chen, L., Shao, L., & Zhou, N. (2021). Audit fee pressure and audit quality: Evidence from China. International Journal of Auditing, 25(1), 182-203. https://doi.org/10.1111/ijau.12223
- Chen, L., Shao, L., & Zhou, N. (2022). Influence of auditor tenure and client dependency on audit fees. Journal of Accounting Research, 30(3), 482-501. https://doi.org/10.2308/jar-2018-004
- DeFond, M., Raghunandan, K., & Subramanyam, K. R. (2000). Do non-audit service fees impair auditor independence? Evidence from going concern audit opinions. Journal of Accounting Research, 38(1), 1-21. https://doi.org/10.2307/2672915
- Francis, J. R., & Wilson, E. R. (1988). Auditor changes: A joint test of theories relating to agency costs and auditor differentiation. The Accounting Review, 63(4), 663-682. https://doi.org/10.2307/247901
- Goddard, J. (2021). Board perceptions of auditor pricing practices: Insights from interviews. Journal of Financial Regulation and Compliance, 29(3), 358-374. https://doi.org/10.1108/JFRC-10-2020-0189
- He, L., Zhang, J., & Wang, X. (2020). Regulatory scrutiny and audit fees: Evidence from China. Journal of International Accounting, Auditing and Taxation, 39, 100296. https://doi.org/10.1016/j.intaccaudtax.2020.100296
- Jones, M. J., & Smith, A. L. (2021). The impact of technological innovations on audit fees: Evidence from the United States. International Journal of Auditing, 25(2), 560-582. https://doi.org/10.1111/ijau.12241
- Lee, C., & Park, S. (2021). Technological disruptions in the banking sector and their implications for audit fees. Review of Accounting Studies, 26(1), 74-102. https://doi.org/10.1007/s11142-020-09548-4
- Lee, C., & Wu, C. (2020). Audit fee determinants and audit quality: Evidence from Taiwan. Review of Pacific Basin Financial Markets and Policies, 23(2), 2050013. https://doi.org/10.1142/S0219091519500135
- Li, X., Gao, X., & Zhang, Y. (2022). Outcome-based pricing in audit engagements: A review and future research agenda. International Journal of Auditing, 26(1), 49-67. https://doi.org/10.1111/ijau.12280
- Li, X., Gao, X., & Zhang, Y. (2022). Outcome-based pricing in audit engagements: A review and future research agenda. International Journal of Auditing, 26(1), 49-67. https://doi.org/10.1111/ijau.12280
- Liu, Y., Zhang, Y., & Wang, M. (2020). Building trust in audit fee negotiations: The role of transparency and communication. Accounting, Organizations and Society, 86, 101162. https://doi.org/10.1016/j.aos.2020.101162
- Palmrose, Z. V. (1986). Audit fees and auditor size: Further evidence. Journal of Accounting Research, 24(1), 97-110. https://doi.org/10.2307/2490869
- Peel, M. J. (2009). Competitive pricing in initial audit engagements: Evidence from the UK. International Journal of Auditing, 13(2), 127-141. https://doi.org/10.1111/j.1099-1123.2009.00401.x
- Simunic, D. A. (1980). The pricing of audit services: Theory and evidence. Journal of Accounting Research, 18(1), 161-190. https://doi.org/10.2307/2490396
- Smith, A. B., Johnson, L. R., & Brown, P. (2021). Client complexity and audit fees: Evidence from Australia. Australian Accounting Review, 31(2), 267-281. https://doi.org/10.1111/auar.12286
- Wang, C., Li, X., & Xie, J. (2021). Auditor independence in fee negotiation: The role of ethical leadership and organizational culture. Journal of Business Ethics, 172(2), 353-372. https://doi.org/10.1007/s10551-020-04679-3
- Wang, X., & Zhang, J. (2021). Industry competition and audit fees: Evidence from China. Pacific-Basin Finance Journal, 67, 101670. https://doi.org/10.1016/j.pacfin.2020.101670
- Zhang, J., & Wang, X. (2020). Building trust in audit fee negotiations: The role of transparency and communication. Accounting, Organizations and Society, 86, 101162. https://doi.org/10.1016/j.aos.2020.101162
- Zhang, J., & Wang, X. (2020). Building trust in audit fee negotiations: The role of transparency and communication. Accounting, Organizations and Society, 86, 101162. https://doi.org/10.1016/j.aos.2020.101162aa
References
Abbott, L. J., Parker, S., & Peters, G. F. (2003). Audit fees, non-audit fees, and auditor reporting on preregulation earnings quality: Evidence from Arthur Andersen. Auditing: A Journal of Practice & Theory, 22(1), 51-69. https://doi.org/10.2308/aud.2003.22.1.51
Awadallah, A. A. (2018). Negotiating audit fees: A study of auditor-client negotiations. Journal of Accounting and Finance, 17(6), 50-65. https://doi.org/10.1016/j.jac.2017.12.004
Chan, K. H., Chen, C. R., Cheng, L. T. W., & Elder, R. J. (2006). The effect of legal environment on voluntary disclosure: Evidence from management earnings forecast issued in U.S. and Hong Kong. Journal of International Accounting, Auditing and Taxation, 15(2), 170-189. https://doi.org/10.1016/j.intaccaudtax.2006.07.002
Chen, L., Shao, L., & Zhou, N. (2021). Audit fee pressure and audit quality: Evidence from China. International Journal of Auditing, 25(1), 182-203. https://doi.org/10.1111/ijau.12223
Chen, L., Shao, L., & Zhou, N. (2022). Influence of auditor tenure and client dependency on audit fees. Journal of Accounting Research, 30(3), 482-501. https://doi.org/10.2308/jar-2018-004
DeFond, M., Raghunandan, K., & Subramanyam, K. R. (2000). Do non-audit service fees impair auditor independence? Evidence from going concern audit opinions. Journal of Accounting Research, 38(1), 1-21. https://doi.org/10.2307/2672915
Francis, J. R., & Wilson, E. R. (1988). Auditor changes: A joint test of theories relating to agency costs and auditor differentiation. The Accounting Review, 63(4), 663-682. https://doi.org/10.2307/247901
Goddard, J. (2021). Board perceptions of auditor pricing practices: Insights from interviews. Journal of Financial Regulation and Compliance, 29(3), 358-374. https://doi.org/10.1108/JFRC-10-2020-0189
He, L., Zhang, J., & Wang, X. (2020). Regulatory scrutiny and audit fees: Evidence from China. Journal of International Accounting, Auditing and Taxation, 39, 100296. https://doi.org/10.1016/j.intaccaudtax.2020.100296
Jones, M. J., & Smith, A. L. (2021). The impact of technological innovations on audit fees: Evidence from the United States. International Journal of Auditing, 25(2), 560-582. https://doi.org/10.1111/ijau.12241
Lee, C., & Park, S. (2021). Technological disruptions in the banking sector and their implications for audit fees. Review of Accounting Studies, 26(1), 74-102. https://doi.org/10.1007/s11142-020-09548-4
Lee, C., & Wu, C. (2020). Audit fee determinants and audit quality: Evidence from Taiwan. Review of Pacific Basin Financial Markets and Policies, 23(2), 2050013. https://doi.org/10.1142/S0219091519500135
Li, X., Gao, X., & Zhang, Y. (2022). Outcome-based pricing in audit engagements: A review and future research agenda. International Journal of Auditing, 26(1), 49-67. https://doi.org/10.1111/ijau.12280
Li, X., Gao, X., & Zhang, Y. (2022). Outcome-based pricing in audit engagements: A review and future research agenda. International Journal of Auditing, 26(1), 49-67. https://doi.org/10.1111/ijau.12280
Liu, Y., Zhang, Y., & Wang, M. (2020). Building trust in audit fee negotiations: The role of transparency and communication. Accounting, Organizations and Society, 86, 101162. https://doi.org/10.1016/j.aos.2020.101162
Palmrose, Z. V. (1986). Audit fees and auditor size: Further evidence. Journal of Accounting Research, 24(1), 97-110. https://doi.org/10.2307/2490869
Peel, M. J. (2009). Competitive pricing in initial audit engagements: Evidence from the UK. International Journal of Auditing, 13(2), 127-141. https://doi.org/10.1111/j.1099-1123.2009.00401.x
Simunic, D. A. (1980). The pricing of audit services: Theory and evidence. Journal of Accounting Research, 18(1), 161-190. https://doi.org/10.2307/2490396
Smith, A. B., Johnson, L. R., & Brown, P. (2021). Client complexity and audit fees: Evidence from Australia. Australian Accounting Review, 31(2), 267-281. https://doi.org/10.1111/auar.12286
Wang, C., Li, X., & Xie, J. (2021). Auditor independence in fee negotiation: The role of ethical leadership and organizational culture. Journal of Business Ethics, 172(2), 353-372. https://doi.org/10.1007/s10551-020-04679-3
Wang, X., & Zhang, J. (2021). Industry competition and audit fees: Evidence from China. Pacific-Basin Finance Journal, 67, 101670. https://doi.org/10.1016/j.pacfin.2020.101670
Zhang, J., & Wang, X. (2020). Building trust in audit fee negotiations: The role of transparency and communication. Accounting, Organizations and Society, 86, 101162. https://doi.org/10.1016/j.aos.2020.101162
Zhang, J., & Wang, X. (2020). Building trust in audit fee negotiations: The role of transparency and communication. Accounting, Organizations and Society, 86, 101162. https://doi.org/10.1016/j.aos.2020.101162aa