DETERMINANTS OF AUDIT FEE AMONG ETHIOPIAN INSURANCE COMPANIES

Abstract

The audit profession has been highly scrutinized among researchers and regulators following the fall of giant companies in the West. One of the issues that gained momentum has been to analyze the audit fee structure and the various auditor-client relationships. This study investigates the determinants of audit fees based on variables that are unique to the insurance firms and considered important by regulators in a sample of Ethiopian insurance companies. So, this research employs quantitative research approach and explanatory research design. The study also examined whether auditors take in to account factors considered important by the regulatory insurance which result in better alignment of both the interests of auditors and the regulatory insurance. The study used a panel data for nine insurance companies among 17 insurance companies by judgmental sampling technique from the year 2006-2015. The data was analyzed by descriptive analysis and inferential analysis and also the data was processed through the E-view software. The panel random effect regression result revealed that auditee size, credit risk, complexity, and profitability are the main determinants of audit fees for the Ethiopian insurance companies. With regard to the factors considered important by the regulatory bank, auditors do not seem to consider liquidity risk and efficiency ratio in the determination of