Ownership structures influence on audit fee

Abstract

Purpose -The purpose of this paper is to investigate the association between corporate ownership structures and audit fees paid to external auditors by Malaysian companies listed on Bursa Malaysia. This study focusses on the extent of the auditor's reliance on the client's internal control inasmuch as the corporate ownership structures are varied, and, ultimately, affect the audit fees. Design/methodology/approach -This study applies the agency theory in formulating three hypotheses that guide the results analysis. By employing a multi regression model for a sample of 345 Malaysian companies listed on Bursa Malaysia, this study examines the relationship of ownership structure, namely, managerial ownership, foreign ownership and government ownership with audit fees using data for 2010. Findings -The results show a significant positive relationship between audit fees and firms with larger foreign ownership and government ownership but no significant relationship with firms with higher managerial ownership. This study contributes recent evidence concerning the relationship between corporate ownership structure and audit fees. Practical implications -Regulators may consider ownership structure on the standards or regulation setting in order to be practical and operationalized in line with the impact associated with different ownership structures. The practitioners may also design appropriate methodologies and procedures for the different ownership structures for high-quality service and to standardize the risk mitigation process. Social implications -The ownership structures have different influences on the audit fees, as well as complexity of the firms and their profitability. Originality/value -The study looks upon certain percentages of ownership structures, and how they affects audit fees, firms complexity and profitability.

Impact of Ownership Characteristics on Modified Audit Opinion in Jordan

“…This result is consistent with earlier finding who studied the association of FOOWN and quality of financial reporting and discovered a negative association between FOOWN and quality of financial reporting in Spain [41]. The result is not consistent with the previous studies by that FOOWN has a positive association with the quality of financial reporting [90,91].…”

“…They establish a significant and positive association between audit fees and firms with larger FOOWN. Nelson and Mohamed-Rusdi found a positive and significant relationship between audit quality and that of corporates with both foreign and INOWN [91]. Contrary to these findings, de Albornoz Noguer and Rusanescu, who assessed the FOOWN and quality of financial reporting, found a negative relationship between FOOWN and quality of financial reporting in Spain [41].…”

Ownership Structured Firms in Malaysia: Audit Committee Characteristics and Audit Fees

“…Abdul Wahab et al (2009) find a positive relationship between institutional ownership and audit fees and they too found that the audit fees are higher for PCON firms during the pre-2007 period. In addition, a study by Sherliza and Nur Farha (2015) show a significant positive relationship between audit fees and firms with larger foreign ownership and government ownership but no significant relationship with firms with higher managerial ownership. Amir (2014) found that family ownership firms pay fewer fees for the audit work.…”

The Relationship between the Ownership Structure, Capital Structure and Performance

“…They proposed that a high level of managerial ownership helps in reducing the conflict between managers and shareholder, which is expected to lead to peter performance. Similarly, other researchers (Li et al, 2007;Nelson & Mohamed-Rusdi, 2015) argued that managerial ownership reduces conflict of interests and therefore enhances the efficiency of management shareholders in doing their job effectively which will improve the performance of the company.…”