International Journal of Finance & Managerial Accounting

International Journal of Finance & Managerial Accounting

Providing a Model for the Factors Affecting the Determination of Audit Fees for Companies Contracted with the Public Sector

Document Type : Original Article

Authors
behrouz janatifar 1
Artin bitari 2
Mahmoud Hemmatfar 3
Mohammad Reza ghorbanian 4
1 PhD Student, Department of Accounting, SR.C., Islamic Azad University, Tehran, Iran.
2 Assistant Professor, Department of Accounting, Shahr-e-Qods Branch, Islamic Azad University, Tehran, Iran.
3 Associate Professor, Department of Accounting, Broojerd Branch, Islamic Azad University, Broojerd, Iran.
4 Assistant Professor, Department of Management, Shahr-e-Qods Branch, Islamic Azad University, Tehran, Iran.
10.22034/ijfma.2025.78406.2247
Abstract
The aim of this study is to provide a model for explaining the factors affecting audit fees in private companies contracted with the public sector. The study design was mixed and exploratory: in the qualitative phase, 11 semi-structured interviews were conducted with audit experts, and based on a grounded theory approach, categories and conceptual relationships were extracted. Then, in the quantitative phase, hypotheses were tested using data from 105 companies listed on the Tehran Stock Exchange during the years 2018–2023 with static and dynamic panel models. The quantitative findings showed that contracts with the public sector have a positive and significant effect on audit fees. Additionally, the professional characteristics of the auditor play a moderating role: the interaction between auditor expertise and public sector contracts reduced the intensity of the increase in audit fees, the interaction between the audit firm's size and public sector contracts was also decreasing and significant, and the interaction between auditor changes and public sector contracts showed a significant increasing effect. The results in the dynamic model (GMM) also confirmed this pattern. The interpretation of the results used the theoretical frameworks of agency theory, institutional theory, transaction cost theory, and political economy of auditing. It was shown that institutional differences and the disclosure/oversight requirements of public sector contracts lead to increased auditor effort and consequently higher audit fees. These findings can provide a basis for revising tariff-setting guidelines and auditor selection regulations.
Keywords: Audit Fees, Public Sector Contracts, Auditor Expertise, Auditor Change, Audit Firm Size
Keywords
Audit Fees, Public Sector Contracts, Auditor Expertise, Auditor Change, Audit Firm Size
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