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Agency Costs in Islamic Countries: Evidence from Iran

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  • Nayereh Nayeri
  • Mahdi Salehi

Abstract

Theoretically, the principal-agent problem can affect audit fees due to the need for an auditor to monitor the business entity. In fact, auditing has a place in the regulatory aspect of any system and has a wide range of applications from the highest level of state administration to the smallest business unit. Any system needs monitoring and feedback for its sustainability, but despite the extent and importance of audit works, there is no model in Iran for determining audit fees. Active companies in the market wish to outdo the competition, while at the same time they have to find ways of reducing the existing costs that put them under much pressure. The present research examines the relationship between competition (proxied by property, plant, and equipment, company’s sales, and cost per sale) and agency cost (proxied by audit fees) of firms using the financial data of 67 companies listed on the Tehran Stock Exchange for the period 2006-2011. The results of the regression analysis indicate that there is a significant negative relationship between competition and audit fees.

Suggested Citation

  • Nayereh Nayeri & Mahdi Salehi, 2013. "Agency Costs in Islamic Countries: Evidence from Iran," The IUP Journal of Accounting Research and Audit Practices, IUP Publications, vol. 0(2), pages 68-76, April.
    • Handle: RePEc:icf:icfjar:v:12:y:2013:i:2:p:68-76
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