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 conclusions drawn from the findings show that reduced audit fees can serve as a good strategy for acquiring clients. Besides, the study findings confirm that as the audit engagement broadens or as the level of audit risk increases, the audit fee also increases. During such times, the auditors will usually present a justification report detailing the reasons behind the increase in the audit fee. The empirical findings have shown that the directors of the clients' boards tend to favor direct discussions with the auditors whenever there is an adjustment in the audit fees. Moreover, the empirical findings have also shown that an increase in the audit fees can negatively impact the auditor-client relationship. An increase in audit fees can also have an effect on audit quality, thereby reducing the level of confidence that the clients have in the auditors. The audit quality will also be affected since it may question the independence and impartiality of the auditor. The findings also show that increased complexity and audit risks are among the reasons that can lead to changes in audit fees. Therefore, it becomes important for the clients to participate actively during such times.