Audit Fee Determinants Of Independent & Subsidiary Unquoted Companies In The Uk—An Exploratory Study

Abstract

Research on the determinants of audit fees has been conducted in a number of countries and suggests that auditee size, auditee complexity and auditor identity are important determinants of the level of the external audit fee. This paper extends earlier research in this area and has four main objectives: first, to test whether earlier findings on audit fees can be generalized to the unquoted sector; second, to test for evidence of audit fee discounting for subsidiaries; third, to present further evidence of differential audit fee pricing by different classes of auditor; and, finally, to test for regional variations in the pricing of audits. The key empirical results suggest that; first, in common with the findings of earlier studies on quoted companies, the most significant factors affecting the audit fees of unquoted companies are auditee size and complexity; second, there is no strong evidence of audit fee discounting for subsidiaries; third that Big-8 auditors were charging an audit premium for independent companies but not for subsidiaries; and finally that there were some regional differences in audit fees.