Impact of firm’s specific factors on audit fee of quoted consumer goods firms

Wasiu Ajani Musa ORCID logo, Ramat Titilayo Salman, Ibrahim Olayiwola Amoo , Muhammed Lawal Subair


Greater pricing presume on audit service has been put by the regulations of the auditing and accounting practices for the disclosure of audit fees, since audit fee is directly related to audit quality. However, the audit fees perceived by the client is often different from the amount charged by the auditors. Hence, this study investigated the impact of firm-specific characteristics on audit fees of quoted consumer goods firms in Nigeria using a purposive sampling technique. Secondary data were obtained from annual reports of the companies for the period from 2009-2016. The empirical result from Breusch-Pagan Lagrange Multiplier Test (BP-LM) produced a chi-square value of 13.94 with p-value of 0.0001 indicating that pooled ordinary least squares (OLS) will not be appropriate for the study. The Hausman test showed a chi-square of 23.55 with a p-value of 0.001 indicating that the null hypothesis is strongly rejected. Thus, the only estimate from the fixed effect model was interpreted to explain the relationship between firm-specific characteristics and audit fees of quoted consumer goods firms in Nigeria. The result revealed that auditee size, auditee risk, auditee profitability and IFRS adoption are the firm specific characteristics that impact on audit fees with only auditee size and IFRS adoption being positively related to audit fees while the other factors are negatively related to audit fees. Based on this finding, this study concluded that the firm’s specific factors are the major drivers of audit fees in Nigeria consumer goods firms. This study recommends among others that companies should implement corporate governance principles that address issues relating to board independence and committee sizes to guide activities in the consumer goods sector since profitability behave negatively with audit fees.

Keywords: Firm-Specific, Factors, Audit Fee, Consumer Goods

Authors’ individual contribution: Conceptualization – W.A.M.; Methodology – W.A.M.; Investigation – R.T.S.; Resources – I.O.A. and M.L.S.; Writing – W.A.M. and I.O.A.; Supervision – R.T.S.; Funding – W.A.M. and M.L.S.

Declaration of conflicting interests: The Authors declare that there is no conflict of interest.

Acknowledgements: We acknowledge the anonymous reviewers, the editor and the seminar participants at the University of Ilorin accounting department for their contributions towards the originality of this paper.

JEL Classification: M41, M42, M52

Received: 09.07.2019
Accepted: 07.04.2020
Published online: 13.04.2020

How to cite this paper: Musa, W. A., Salman, R. T., Amoo, I. O., & Subair, M. L. (2020). Impact of firm’s specific factors on audit fee of quoted consumer goods firms. Corporate Governance and Sustainability Review, 4(1), 47-55.

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