Intellectual Capital : A Case for Audit Pricing Semiosis

This study considers the validity of the determinants of audit pricing. Audit pricing research has always been approached from the traditional positivist research methodology which yield results that may not give a full account of what determines and influences audit fees. This mainstream approach gives the perception that the actors within the audit pricing discourse are objective and rational by nature during the course of their interactions. In addition, the researcher is also perceived to be unbiased and impartial. Such assumptions are not suitable for social science research, because they tend to oversimplify the way that people and organisations behave. Interpretive and critical paradigms are the traditional alternatives to positivist research. Interpretive researchers seek to reach an understanding of the phenomena being observed. While critical researchers, in addition to seeking an understanding, may also critique such phenomena in respect to the morality and fair treatment of the parties involved who may have an unequal distribution of power. These traditional alternatives have their limitations and may subject the researcher to being accused of being too subjective or too political. From our research, the interpretive and critical approaches have never been applied to audit pricing research and semiotics is proposed as a viable alternative due to the flexibility offered in using the Peircian model. That is, the researcher can apply a semiotic approach in which they have the freedom to incorporate the key characteristics from both the interpretive and critical paradigms. Semiotics is applied to audit pricing with an objective of shedding new light on what factors determine audit fees. Stamper's Semiotic Framework was deployed in undertaking the analysis using six analytical levels, namely : the physical level, empirics, syntactics, semantics, pragmatics and the social level. The model was further extended through giving greater emphasis to the interactions between the parties. The traditional positivist approach, which explained audit pricing was mainly attributed to the size of the audit client and the audit firm. But an in-depth semiological analysis of the interactions between the parties within the discourse of audit pricing revealed a number of new ideas in addition to 'size' variable. Such idea include the influence of government intervention in the standard setting process, the audit profession's barriers to entry, risk of legitimation from the client and the client's internal control function. These may be used, as the basis for further research into areas previously not considered by past literature.