AN EXAMINATION OF CLIENT BOARD MEMBERS’ PERCEPTIONS REGARDING AUDIT FEE PRICING METHODS: A FIELD STUDY IN IRAQ

Abstract

Today, reductions in audit fees offered by certain firms, together with the introduction of minimum fee thresholds, represent prominent sources of disagreement within the auditing profession. Although audit engagements may sometimes be priced at comparatively low levels, such pricing strategies may reflect underlying motives on the part of auditors, including the possibility of increasing the fees in subsequent periods. Accordingly, the present study aims to examine how members of corporate boards perceive different approaches to determining audit fees. In terms of its objective, the study is applied in nature. From a methodological perspective, it adopts a qualitative approach and is designed as an exploratory, descriptive, and survey-based investigation. Empirical information was obtained through interviews conducted with board members. The findings reveal that offering discounted audit fees functions as an effective strategy for attracting new clients. The evidence further demonstrates that when the audit engagement expands in scope or when the associated risk level rises, the audit fee correspondingly increases. In such circumstances, auditors typically accompany the fee adjustment with a formal justification report explaining the reasons for the increase. In addition, the empirical results indicate that representatives of the client’s board tend to prefer direct negotiation and communication with auditors when revisions in audit fees occur. Furthermore, the analysis suggests that increases in audit fees may adversely affect the relationship between auditors and clients. Such increases can also influence perceptions regarding audit quality, potentially weakening client trust and raising concerns about the auditor’s independence and impartiality. The results additionally indicate that greater audit complexity and heightened audit risk are key factors prompting changes in audit fees. Consequently, active participation by the client in the process of revising audit fees becomes necessary when such adjustments are considered.