IDEAS home Printed from https://ideas.repec.org/a/gam/jjrfmx/v16y2023i2p93-d1058689.html
   My bibliography  Save this article

The Relationship between Intellectual Capital and Audit Fees

Author

Listed:
  • Mahmoud Lari Dashtbayaz

    (Department of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad 9177948974, Iran)

  • Amjed Hameed Mezher

    (Department of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad 9177948974, Iran)

  • Khalid Haitham Khalid Albadr

    (Department of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad 9177948974, Iran)

  • Bashaer Khudhair Abbas Alkafaji

    (Department of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad 9177948974, Iran)

Abstract

The present study investigates whether intellectual capital (IC) is related to audit fees and financial statement restatements in companies listed on the Iraq Stock Exchange (ISE). The present study is a pioneer investigation of this topic in emerging markets. Using a sample of all listed companies on the ISE from 2014 to 2020, the research hypotheses are tested with multiple regression based on panel data and the fixed-effects model. The results demonstrate that intellectual capital is positively and significantly related to normal and abnormal audit fees. Moreover, findings indicate direct and significant relationships between intellectual capital components and normal and abnormal audit fees. This means investment in IC components is likely to determine the auditors’ evaluation of a given client’s riskiness. Thus, an efficient IC investment level might be considered a key factor that companies are expected to consider. The findings of this study provide valuable implications for users of financial statements, analysts, and policymakers with information regarding IC, risk determinants, and audit fees. Policymakers can improve market efficiency by implementing regulations that foster IC disclosure as a risk-determinant factor.

Suggested Citation

  • Mahmoud Lari Dashtbayaz & Amjed Hameed Mezher & Khalid Haitham Khalid Albadr & Bashaer Khudhair Abbas Alkafaji, 2023. "The Relationship between Intellectual Capital and Audit Fees," JRFM, MDPI, vol. 16(2), pages 1-28, February.
    • Handle: RePEc:gam:jjrfmx:v:16:y:2023:i:2:p:93-:d:1058689
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/1911-8074/16/2/93/pdf
    Download Restriction: no
    File URL: https://www.mdpi.com/1911-8074/16/2/93/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Mahdi Salehi & Grzegorz Zimon, 2021. "The Effect of Intellectual Capital and Board Characteristics on Value Creation and Growth," Sustainability, MDPI, vol. 13(13), pages 1-16, July.
    2. Grzegorz Zimon & Andrea Appolloni & Hossein Tarighi & Seyedmohammadali Shahmohammadi & Ebrahim Daneshpou, 2021. "Earnings Management, Related Party Transactions and Corporate Performance: The Moderating Role of Internal Control," Risks, MDPI, vol. 9(8), pages 1-26, August.
    3. Gnanakumar Visvanathan, 2017. "Intangible assets on the balance sheet and audit fees," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 14(3), pages 241-250, August.
    4. Simunic, Da, 1980. "The Pricing Of Audit Services - Theory And Evidence," Journal of Accounting Research, Wiley Blackwell, vol. 18(1), pages 161-190.
    5. Shan, Yuan George & Troshani, Indrit & Tarca, Ann, 2019. "Managerial ownership, audit firm size, and audit fees: Australian evidence," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 35(C), pages 18-36.
    6. Stanley, Jonathan D. & Todd DeZoort, F., 2007. "Audit firm tenure and financial restatements: An analysis of industry specialization and fee effects," Journal of Accounting and Public Policy, Elsevier, vol. 26(2), pages 131-159.
    7. Ngoc Phu Tran & Duc Hong Vo, 2020. "Human capital efficiency and firm performance across sectors in an emerging market," Cogent Business & Management, Taylor & Francis Journals, vol. 7(1), pages 1738832-173, January.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Nan-Ting Kuo & Cheng Few Lee, 2020. "A Potential Benefit of Increasing Book–Tax Conformity: Evidence from the Reduction in Audit Fees," World Scientific Book Chapters, in: Cheng Few Lee & John C Lee (ed.), HANDBOOK OF FINANCIAL ECONOMETRICS, MATHEMATICS, STATISTICS, AND MACHINE LEARNING, chapter 3, pages 151-197, World Scientific Publishing Co. Pte. Ltd..
    2. Habib, Ahsan, 2011. "Audit firm industry specialization and audit outcomes: Insights from academic literature," Research in Accounting Regulation, Elsevier, vol. 23(2), pages 114-129.
    3. Audrey Wen-Hsin Hsu & Chih-Hsien Liao, 2023. "Auditor industry specialization and real earnings management," Review of Quantitative Finance and Accounting, Springer, vol. 60(2), pages 607-641, February.
    4. Persefoni Polychronidou & George Drogalas & Ioannis Tampakoudis, 2020. "Mandatory rotation of audit firms and auditors in Greece," International Journal of Disclosure and Governance, Palgrave Macmillan, vol. 17(2), pages 141-154, September.
    5. Ball, Fiona & Tyler, Jonathan & Wells, Peter, 2015. "Is audit quality impacted by auditor relationships?," Journal of Contemporary Accounting and Economics, Elsevier, vol. 11(2), pages 166-181.
    6. Iman Harymawan & Aditya Aji Prabhawa & Mohammad Nasih & Fajar Kristanto Gautama Putra, 2021. "Risk Management Committee, Auditor Choice and Audit Fees," Risks, MDPI, vol. 9(9), pages 1-16, August.
    7. Garcia-Blandon, Josep & Argiles, Josep Ma, 2015. "Audit firm tenure and independence: A comprehensive investigation of audit qualifications in Spain," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 24(C), pages 82-93.
    8. Chen, Vincent Y.S. & Keung, Edmund C. & Lin, I-Min, 2019. "Disclosure of fair value measurement in goodwill impairment test and audit fees," Journal of Contemporary Accounting and Economics, Elsevier, vol. 15(3).
    9. Alhababsah, Salem & Yekini, Sina, 2021. "Audit committee and audit quality: An empirical analysis considering industry expertise, legal expertise and gender diversity," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 42(C).
    10. Mahdi Salehi & Grzegorz Zimon & Hayder Adnan Hashim & Ryszard Jędrzejczak & Adam Sadowski, 2022. "Accounting Quality and Audit Attributes on the Stock Price Crashes in an Emerging Market," Risks, MDPI, vol. 10(10), pages 1-24, October.
    11. Amahalu Nestor Ndubuisi & Beatrice O. Ezechukwu, 2017. "Determinants of Audit Quality: Evidence from Deposit Money Banks Listed on Nigeria Stock Exchange," International Journal of Academic Research in Accounting, Finance and Management Sciences, Human Resource Management Academic Research Society, International Journal of Academic Research in Accounting, Finance and Management Sciences, vol. 7(2), pages 117-130, April.
    12. Carlos Corona & Ramandeep S. Randhawa, 2010. "The Auditor's Slippery Slope: An Analysis of Reputational Incentives," Management Science, INFORMS, vol. 56(6), pages 924-937, June.
    13. Ettredge, Michael & Fuerherm, Elizabeth Emeigh & Li, Chan, 2014. "Fee pressure and audit quality," Accounting, Organizations and Society, Elsevier, vol. 39(4), pages 247-263.
    14. Laurence Kranich & Andrés Perea & Hans Peters, 2005. "Core Concepts For Dynamic Tu Games," International Game Theory Review (IGTR), World Scientific Publishing Co. Pte. Ltd., vol. 7(01), pages 43-61.
    15. Sellers, R. Drew & Fogarty, Timothy J. & Jadallah, Jadallah, 2020. "Has the new world order taught the big four to manage client portfolio risk? Examining extreme loss occurrences before and after Sarbanes Oxley," Advances in accounting, Elsevier, vol. 51(C).
    16. Sang Cheol Lee & Mooweon Rhee & Jongchul Yoon, 2018. "Foreign Monitoring and Audit Quality: Evidence from Korea," Sustainability, MDPI, vol. 10(9), pages 1-22, September.
    17. Md. Mominur Rahman & Bilkis Akhter, 2021. "The impact of investment in human capital on bank performance: evidence from Bangladesh," Future Business Journal, Springer, vol. 7(1), pages 1-13, December.
    18. Garcia-Blandon, Josep & Argiles-Bosch, Josep Maria & Castillo-Merino, David & Martinez-Blasco, Monica, 2017. "An Assessment of the Provisions of Regulation (EU) No 537/2014 on Non-audit Services and Audit Firm Tenure: Evidence from Spain," The International Journal of Accounting, Elsevier, vol. 52(3), pages 251-261.
    19. Pinto, Inês & Morais, Ana Isabel & Quick, Reiner, 2020. "The impact of the precision of accounting standards on the expanded auditor’s report in the European Union," Journal of International Accounting, Auditing and Taxation, Elsevier, vol. 40(C).
    20. Smith, Deborah Drummond & Gleason, Kimberly C. & Kannan, Yezen H., 2021. "Auditor liability and excess cash holdings: Evidence from audit fees of foreign incorporated firms," International Review of Financial Analysis, Elsevier, vol. 78(C).

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:gam:jjrfmx:v:16:y:2023:i:2:p:93-:d:1058689. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.