The issuance of ATR 14 by ICAP

Before the issue of ATR-14 by ICAP, audit fee was used to be measured based on the common footings & A ; conditions of audit houses & A ; companies at the clip get downing an audit battle. That audit fee was used to be increase by 5 to 10 % in the proceeding twelvemonth.

The job with audit fee started lifting with the addition of over 200 % in the stipend rates of audit trainees & A ; besides with the inflationary force per unit areas in Pakistan. Where, audit houses consider themselves at loss due to increase in audit costs originating from the increased stipend rates & A ; rising prices.

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1.2 Problem Statement

Given the company ‘s information of entire assets, turnover, current ratio, purchase ratio, turnover, rising prices in the economic system & A ; minimal stipend rate set by ICAP, the job is to find the existent factors impacting the audit fee & A ; to obtain a theoretical account that determines the audit fee.

1.3 Hypothesiss:

Based on our several variables & A ; intended research our hypothesis will be:

H1: Entity ‘s entire assets has a important impact in finding of audit fee in Pakistan. H2: Current Ratio has a important impact in finding of audit fee in Pakistan.

H3: Leverage Ratio has a important impact in finding of audit fee in Pakistan.

H4: Inflation in the state has a important impact in finding of audit fee in Pakistan.

H5: Entity ‘s Turnover has a important impact in finding of Audit Fee in Pakistan.

H6: Addition in the minimal stipend rate for trainees has a important impact in the finding of audit fee after 2008.

These hypotheses are tested with a assurance degree of 95 % and with an Alpha of 5 % .

1.4 Outline of the survey

The aim is to set up a theoretical account to measure the audit fee by integrating new factors such as minimal stipend rate, rising prices & A ; entity ‘s turnover impacting the ratings of audit fee in Pakistani Market. Along with the new factors as discussed above, antecedently studied variables will be considered every bit good in set uping the theoretical account that determines the audit fee in Pakistani Market.

Equally far as audit fee is concerned, it is the basic beginning of gross for audit house & A ; it is really of import for audit spouses to measure the basic determiners of audit fee and the factors due to which audit fee may change.

ATR-14 was issued by Institute of Chartered Accountants of Pakistan, in August, 2008 sing minimal audit fee to be kept for audit battles. That presentment from ICAP makes mandatary, for the houses making audit of listed and public sector entities to bear down a minimal audit fee. Minimum audit fee is now besides dependant on the entity ‘s turnover. e.g set a minimal audit fee of Rs.2,50,000 for entities holding turnover of Rs.500 million.

Further, it was besides notified by ICAP, that determination of audit fee will take into history the inflationary effects & A ; the addition in minimal stipend rate over the last few old ages.

1.5 Definitions:

Auditing: Auditing is an independent appraisal of fiscal statements of an entity in order to carry on a elaborate sentiment whether such fiscal statements give a true & A ; just position.

Audit Requirement: As per Companies Ordinance, 1984, every company whether public or private is required to hold detailed audit of their fiscal statements from an external hearer.

Audit Service: These external audits are provided by audit houses which must be in the signifier partnership holding all spouses with the making of hired comptrollers.

Audit Fee: This audit service will be provided to a company by bear downing a certain fee. This fee is called audit fee. Other so audit, audit houses besides offers non-audit services to the company I ; vitamin E to her clients services such as composing books of histories, digest & A ; revenue enhancement services. Fee charged against supplying these services are non-audit fee for an audit house.

Employee turnover: It is fundamentally the gross generated by a company from sale of goods and services. Employee turnover is the annual gross revenues volume after seting the sums for price reductions and gross revenues revenue enhancements.

Current Ratio: It is a liquidityA ratio that measuresA a company ‘s ability to pay short-run duties.

Leverage Ratio: Harmonizing to Lund, ( 2007 ) Debt to Equity Ratio is besides referred to as Debt Ratio, Financial Leverage Ratio or Leverage Ratio.

Debt to Equity Ratio = Short Term Debt + Long Term Debt

Entire Shareholders Equity

The debt to equity ( debt or fiscal purchase ) ratio indicates the extent to which the concern relies on debt funding.

Minimal Stipend Ratess: Stipend here is the fees collectible by an audit house to its trainees for carry oning a certain audit. These stipend rates are affixed by ICAP to scrutinize houses as minimal stipends collectible to a certain trainee. Two sets of stipend rates have been taken in our analysis, viz. Stipend-1 & A ; Stipend-2.

Stipend-1: It is the stipend rate for audit trainees who are at the phase of CA-Intermediate.

Stipend-2: It is the stipend rate for audit trainees who are at CA-Final Stage.

Chapter 2:


One of the surveies related to this topic was the work done by Simon & A ; Jere ( 1988 ) . The aims of the survey by Simon & A ; Jere ( 1988 ) was to find whether monetary value cutting consistently occurs on initial audit battles and if it does, so, to find when audit fee recover or return to normal degrees. There were allegations, nevertheless, that houses sometimes offer comparatively low fee for the first twelvemonth or the first few old ages of an audit, with the outlook of retrieving the initial loss in subsequent old ages. It was believed that suiting an audit battle with the expectancy of countervailing initial losingss or lower grosss with cost to be charge in future audits creates the same status and represents the same menace to independency. The work in their survey was extended in two of import ways. First, a big sample of 214 public companies altering hearers over the period 1979-1984 is tested along with 226 control houses non altering hearers over the same period. Second, the presence of monetary value film editing is tested for the 2nd through 6th old ages every bit good as the initial engagement twelvemonth. The intent of this trial is to find if monetary value film editing persists beyond the initial twelvemonth, and if so, to find when the audit fee returns to the normal ( control sample ) degree for a go oning battle. Test consequences show an mean price reduction of 24 per centum in the initial engagement twelvemonth and 15 per centum for each of the following two old ages. By the 4th twelvemonth, audit fee are non significantly different from normal degrees for go oning battles. This determination shows that systematic monetary value cutting appears to happen, that it is of a significant sum, and that it persists on norm over several old ages.

Survey by Markelevich & A ; Charles ( 2007 ) was intended to detect the association between fee audit fee & A ; its quality. They used informations of 4 old ages during the period 2000-20003. Their work assembles a step for profitableness of hearer that can be employed as a replacement for hearer ‘s independency. The maneuver was stranded in the belief that hearer ‘s independency is prejudiced by effort of risk-adjusted fee instead than the phase of fee received from clients. Because the hazard & A ; attempt are unexamined, the paper uses options based on client ‘s dimension, denseness & A ; hazard to come close irregular fee. Fee which is unnatural are attendant of appraisal of fee theoretical account concluded from earlier surveies. This survey farther utilizes two prosodies to measure quality of audit I ; e the SD of remainders tie ining accumulations which are current to hard currency flows & A ; the fixed values of public presentation adjusted discretional accumulations. The survey manuscripts a significantly reverse association amid audit fee & A ; audit value options over all old ages. These consequences are healthy for a scope of auxiliary trials & A ; some other design footings.

The survey of Michael, Peter, Robert & A ; Amy ( 1992 ) describes the behaviour of audit fee during a period of evident increasing competition in the market for independent audit services. The intent of their survey was to find whether existent audit fee decreased between 1977 and 1981. The interval started with federal probes of anticompetitive behaviour in the accounting profession, included several alterations in the accounting profession that, coupled with the economic downswing of the late seventiess and early 1980s, could hold increased competition in the market for audit services. The survey sample was developed from a set of publically traded companies describing external audit fee in a University of Michigan database. Of the 98 companies describing these informations for 1977 and 1981, the two old ages of involvement, 20 were expelled to restrict the likely puzzling effects of major alterations in internal auditing, the impact of hearer turnover, and alterations in ordinance of the banking industry on external audit fee. The survey finds a important lessening in existent audit fee between 1977 and 1981. These findings were non sensitive to alternate specifications of the audit fee theoretical account and were non driven by any peculiar industry or audit house. The consequences of their survey were consistent with claims of increasing fee competition in the market for independent audit services. In position of the figure of alterations happening in the audit profession and the market during that period, it is hard to do causal illations about the effects of peculiar alterations in the profession on audit fee. Therefore, this article should be viewed as a descriptive survey of the behaviour of audit fee in a clip when the market for audit services was allegedly going more competitory.

David & A ; Richardson, ( 2003 ) surveies the association amid the fee paid to hearers for audit & A ; non-audit service. They used a joint sample of big houses & A ; set up a ratio of non-audit fee to entire fee has a direct impact with the absolute value of accumulations similar as concluded by other surveies such as Frankel, Johnson and Nelsen ( 2002 ) . The sample consists informations of 5815 houses for 2000 & A ; 2001. But the positive relation merely occurs for 8.5 % houses of the sample who were holding homogeneous arrested development construction. Whereas, in contrast to the fee ratio consequences, consistent facts was found of a contrary confederation between the phases of both types of audit fee ( audit & A ; non-audit fee ) paid to the hearers & A ; accumulations. So, Higher fee were associated with smaller accumulations. It was besides indicated that the opposite association was most common for clients holding weak administration. In general, result of this work was more regular for hearer behavior being controlled by the effects related with allowing clients to prosecute in unusual accrual picks.

In malice of widespread survey on the determiner of external audit fee, there is modest survey on the impact of internal audit engagement on the external audit fee. Survey by William, Audrey & A ; Mario ( 1999 ) initiated the construct for function of internal audit in finding audit fess for companies. They used cross-sectional arrested development reproduction based on old audit fee research. Their research gives indicant that the function of internal audit is a major determiner of the external audit fee. Furthermore, a 2nd signifier that provides verification on the determiners of internal audit part was formed and verified. This 2nd model signifies that internal audit ‘s function is dependent on quality of internal audit and, probationary on the phase of natural hazard, the handiness of internal audit and the range of synchronism between internal and external hearers. These findings are based on an sole data-set inclusive of publically available informations in clip with study answers from internal and external hearers associated with 70 non-financial services, Fortune 1000 companies. The sample consists of all of the ex- “ Large 6 ” international accounting houses and clients from 29 diverse industries. result signifies that the greater the part of the internal hearers to the fiscal statement audit, the lower the audit fee. Examination of the factors act uponing internal audit part suggests that function of internal audit is subjective by internal audit quality. We besides find that as built-in hazard additions, the consequence of internal audit handiness on part diminishes, while the consequence of coordination on part additions. Overall, findings suggests that internal audit part can ensue in decreased external audit fee, and that client houses can potentially impact internal audit part by puting in internal audit quality, pull offing handiness, and easing coordination between the internal and external hearers.

The survey by Craswell & A ; Jere ( 1999 ) examines initial engagement pricing in Australia during a clip period when comparable U.S. surveies reported price reductions of 25 per centum.This Australian grounds finds initial battle dismissing merely for ascents from non-Big 8 to Big 8 hearers. The survey examines initial engagement pricing in Australia for a sample of 224 initial battles from the mid-1980s. The empirical consequences reveal that no important price reductions occur for three of four distinguishable types of initial audit battles. Specifically, no price reductions were observed for initial battles originating from within Big 8 hearer alterations or within non-Big 8 hearer alterations or even alterations from Large 8 to non-Big 8 hearers. Fee price reductions were observed merely for the alterations from a non-Big 8 to Big 8 hearer. The intent of this survey was besides to find whether initial battle audit fee price reductions do or make non happen in scenes where audit fee are publically disclosed. Audit fee are publically disclosed in Australia and no grounds was found of fee discounting except when the initial battle is an ascent in audit quality from a non-Big 8 to Big 8 hearer. The ascertained initial audit fee price reduction for ascents to Big 8 hearers is consistent with the well-established economic theory of price reduction pricing of higher priced higher-quality experience goods ( like Big 8 audits ) as an incentive to buy when there is information a symmetricalness between purchaser and marketer sing merchandise quality that is resolved merely through buying the good.

The primary motive for the survey by Pong & A ; Whittington ( 1994 ) was to derive an apprehension of the working of the audit market & A ; peculiarly with regard to issues of Big-8 audit houses & A ; low-balling. In this survey by Pong & A ; Whittington, it was determined that the size of the company ( auditee ) is of cardinal importance for the computation of audit fee. An auditee size can be measured in footings of entity ‘s entire assets or entire turnover. Further, complexnesss of audit & A ; the endeavor ‘s profitableness besides have a really important impact on audit fee. Complexity in this survey was considered in footings of the measure of subordinates each company ( auditee ) is holding. In this survey, relation between complexness of audit & A ; audit fee was besides been associated with the Big-8 consequence. By their consequences it was found that Big-8 audits were more expensive than non-Big-8 audits. But the premium for complexness for Big-8 audit houses was lesser than that charged by the non-Big-8 houses, proposing that they are comparatively efficient in making complex plants. On these evidences it was unable to reason that the Big-8 is comparatively cheap in making larger audits. With respect to the low balling, a relentless inclination was observed for freshly appointed hearers to bear down lesser than on norm to incumbent hearers. It was specially observed in the instance of freshly appointed hearers when they were non Big-8 hearers. However, the Big-8 besides charged somewhat less when freshly appointed. So, it is possible to reason that low-balling takes topographic point when the new hearer does non bear down a premium to cover set-up costs.

The intent of the article by Mark, Raghunandan & A ; Subramanyan ( July,2002 ) was to through empirical observation verify the connexion between non-audit ( and audit ) fee paid to current hearers and hearer independency, where hearer independency is substituted by the inclination of hearers to describe the issue of sentiment traveling concern. They carry out their survey on 1158 troubled houses with proxy statements that incorporate revelation of audit fee. Their work besides constitutes the survey of 96 houses who were issued traveling concern audit studies for the first clip.

Ismail Adelpo ( 2009 ) indicated possible misspecification in the individual additive equation theoretical account and the potency for coincident equation footing in the SEM. The panel informations analysis confirms the findings of anterior literature that there is a relationship between audit and non-audit fee but statistically undistinguished. The intent of his paper was to analyze patterning issues in the research of the relationship between audit and non-audit fee by comparing the result of a single-equation theoretical account of fee to the consequences of coincident equation theoretical account ( SEM ) of these interactions for a sample of 2072 UK listed companies and besides by researching the benefits of utilizing a panel information attack. Consequences by Ismail revealed that although the documented positive relationship in the individual theoretical account is stable between audit fee and non-audit fee, this consequence suffers from coincident equation prejudice. The panel information analyses besides indicated a positive relationship between audit and non-audit fee but statistically undistinguished. Furthermore, a figure of the variables that were antecedently found to be statistically important in finding hearers ‘ fee were non found to be statistically undistinguished under the fixed effects theoretical account.

The survey by Kamal Naseer & A ; Rana Nuseibeh ( 2007 ) examines the audit fee construction in a developing economic system. The reproduction for audit fee was experienced by usage of cross sectional arrested development on variables such as profitableness, hazard, position of the audit house, corporate size, grade of corporate complexness, corporate accounting twelvemonth and the hold amid the audit study and the accounting twelvemonth terminal. The radioactive dust of the survey concealed that audit house ‘s position, type of industry, degree of complexness, industry type & A ; hazard are the premier factors for audit fee. Nevertheless, factors such as corporate accounting twelvemonth terminal, profitableness & A ; clip hold amid twelvemonth terminal & A ; audit study day of the month appeared to be immaterial factor for audit fee finding. A major part of their survey is the usage of entire figure of employees as a size step. Since, entire assets are likely to be affected by age, plus replacing determinations and the pick of accounting policies in usage within the company. It is possible to see similar companies describing similar assets at different values. Hence, the employee figure engaged by a corporation forms a more nonsubjective step of size.

Paper by Santanu Mitra, Donald R.Deis & A ; Mahmud Hossain examines the empirical association between expected and unexpected audit fees and reported net incomes quality for a sample of Large 4 client companies over a period from 2000 to 2005. For information analysis, they used the information of 1142 houses for 5 old ages during the period of 2000 to 2005.The intent of the paper was to measure the relation between both expected and unexpected audit fees and performance-adjusted discretional accumulations. Consequences revealed that addition in the net incomes quality have a positive association with expected & amp ; unexpected audit fees which was besides indicated by the decrease of both absolute & A ; signed discretional accrual accommodations. Furthermore, in some specific these tendencies were found to be consistent in the period after the execution of Sarbanes-Oxley Act. They segregate the audit fees into expected & amp ; unexpected audit fees in order to individually capture the consequence of the two fee concepts holding different fee concepts holding different economic deductions for hearers. Final consequence holds that expected audit fees is based on hearer ‘s attempts is consistent with client-specific hazard, profitableness growing & A ; the complexness of client ‘s concern. Whereas, unexpected audit fees which was may be dependent on the client specific concern relation.

Another survey was made by Santanu Mitra, ( 2009 ) on the topic of audit fees with relation to SOX act. The intent of his paper was to verify the relation of audit fess with pervasiveness, badness & A ; redress of internal control stuff failing ( ICMW ) as reported by the SEC registrants under SOX subdivision 404 & A ; audit fees. His paper employs a multivariate arrested development theoretical accounts for a sample of 854 houses holding their informations for 3 old ages i ; e 2004,2005 & A ; 2006. These 854 are those houses that disclosed ICMW for the first clip in these 3 old ages. Attempt was to look into the association of pervasiveness and badness of ICMW and its subsequent redress with audit fees. The consequences reveal that audit fees are positively associated with badness, pervasiveness when the companies were unwraping ICMW. Besides, the audit fees was found negatively associated in the old ages when the companies when ICMW redress took topographic point. The consequences besides shows that audit fees have a higher impact when the redress of systematic control failings took topographic point as compared to the redress of non-systematic ICMW.

The survey by Andrew Ferguson, Jere R.Francis & A ; Donald J.Stoke ( 2002 ) takes into history the function of expertness of an hearer in footings of either industry or office degree. They examine these functions in pricing of audits by Big-5 audit houses in Australia. they tests whether an audit market monetary values an hearer based on its broad industry expertness or or instead based on its office degree expertness. It was concluded that there was a premium of 24 per centum overall for an industry expertness when the hearer is both metropolis specific industry leader & A ; of the top two houses nationally in the industry. No premium was found as earned for top two nationally graded houses where they are non metropolis leaders. It was eventually documented that office degree industry leading in metropolis specific audit markets plays a critical function in the development of market perceptual experience & A ; pricing of audit assignments. As their consequences supply support for the office degree expertness instead than industry broad expertness.

Individual survey by Zoe-Vanna Palmorse, ( 1989 ) examines the consequence of audit fees in relation to the nature of audit contract type. These natures were either based on fixed fee or cost reimbursement footing. The background of his survey was the hypothesis of earlier researches that audit fees would be higher for fixed fee audit construction with low figure of audit hours. His survey verifies the association of contract type to scrutinize fees & A ; hours. Consequences indicated that audit fee was relatively found lower with no relation to scrutinize hours. He used informations of 361 public or closely held companies for his analysis. The research besides implies that contract pick whether fixed or cost-reimbursement is neither dependent on the type of hearer ( Large Eight or non-Big Eight ) , company ‘s twelvemonth nor neither on the hearer ‘s owned agenda ( busy or non-busy season ) . Furthermore, fixed fee audit contract type was found predominant in the early old ages of auditor-client relationship with no consequence of monetary value cutting on audit fees. Finally, the survey values both types of contract in footings of undertaking uncertainness as hypothesized by the concerned hearers & A ; their inducements.

The primary focal point of the work by Iain Gerrard, Keith Houghton and David Woodliff, ( 1994 ) were to organize a descriptive theoretical account of audit fee variableness, the being and function of the internal audit in audit fees finding, industry differences in explanatory audit fees theoretical accounts. Auditee size & A ; the audit complexness were taken as the primary variables. Their survey besides examined some alternate steps for auditee size & A ; complexness which can be used to organize a theoretical account for some degree of descriptive power. Marked industry differences will play a function in finding of theoretical account for audit fees. But significantly, no function was found of internal audit as a component of audit fee finding.

Chapter 3:


3.1 Method of Data Collection

Data aggregation was based on extraction from Web Sites. The web sites used for informations aggregation were of the 40 companies on which research has been carried out. Further, database of ICAP & A ; SBP was besides used to cite the rates of rising prices & A ; stipend rate for trainee ‘s severally.

3.2: Sampling Technique & A ; Sample Size:

A representative information of 40 public limited companies out of 818 listed in Karachi Stock Exchange was selected for the last 4 old ages to prove the hypothesis. These 40 companies ‘ informations was chosen based on the footing of their entire assets as on 30th June,2010. It means that 40 companies holding the highest figure for entire assets were selected for our analysis. These companies belong to different sectors such as Oil & A ; Gas, Cement, Textiles, Chemicals & A ; Telecom.

Due to complex nature of fiscal statements from the fiscal sector, all those companies were excluded from the analysis such as Banks, Renting Companies, Investment Companies etc,

The information was of last 4 old ages fiscal statements of these above mentioned sectors i ; vitamin E from 2007 to 2010.

3.3 Research Model Developed:

Consistent with the anterior audit fee literature ( e.g. Mitra et Al, 2009 ; Ferguson et Al, 2003 ; Mitra, 2009 ; Palmrose, 1986 ; Palmrose, 1989 ) , the research has employed the multi additive arrested development theoretical account to analyze the association of our proposed variables i ; e rising prices, turnover & A ; stipend rate with audit fees.

Furthermore, other three Variables I ; e Entity ‘s Entire Assets ( TA ) , Leverage Ratio ( LEV ) & A ; Entity ‘s Current Ratio ( CR ) were found as the most common variables in finding of audit fee ( AF ) . These variables have been used by about all of the old research workers.

AF = I± + I?1TA + I?2LEV + I?3CR + I?4INF + I?5LnTO + I?6Stp1 + I?7Stp2 + E


AF =

Audit Fee.

TA =

Entity ‘s Entire Assetss,


Leverage Ratio

CR =

Current Ratio.

LnTO =

Log of Entity ‘s Entire Employee turnover.


Inflation at each Year End.

Stp-1 =

Stipend Rate for CA-Inter Trainees

Stp-2 =

Stipend Rate for CA-Finalist Trainees

Tocopherol =

Error Term

Our hypothesis will be tested based on the above theoretical account with a assurance degree of 95 % and with an Alpha of 5 % .

3.4 Statistical Technique

On the footing of all variables as graduated table or numeral, technique of multiple additive arrested development for proving our hypothesis.


Table-A above describes the several correlativities among each variable in our informations. These correlativities were obtained of all variables with their existent values i ; e without using any transmutation.

The above tabular array describes three independent variables which were eventually used for our informations analysis. These three variables are reciprocals of Stipend_2, Total Assets & A ; Entire Employee turnover with the independent variable as Ln of reciprocal of Audit Fees.

Table-C exhibits the consequence of R & A ; R- Square. R-coefficient of correlativity of 0.672 indicates a mildly strong correlativity between our ascertained & A ; expected values.

Whereas value of R-Square, coefficient of finding, .451 indicates that the theoretical account is overall explicating 45 % fluctuation of the information. Whereas, staying 55 % fluctuation in information is due to other factors non defined by our theoretical account.

Table-D above of Anova shows important value of less than 0.05. It means that arrested development technique can be applied in our theoretical account.

Besides, the ratio of amount of squares of Regression & A ; Residual, 45:55 supports our consequences of R-Square as described in Table-C above.

Table-E depicts the consequences of important values of variables which are eventually found as important from running arrested development technique.

These values were obtained after excepting those variables which were found as insignificant for our analysis. Besides, all outliers of the informations were removed in ulterior portion of the survey.

As illustrated by the coefficients consequences below, variables such as purchase ratio, current ratio & A ; rising prices were excluded from the theoretical account.

Further. Transformations of Lon & A ; Reciprocal were applied to acquire the remainders of our variables as normal.

Now our theoretical account will be:

Ln_Rec _ AF = -0.676 + 657_Rec_TA +1236 Rec_ TO + 3595_Rec_ Stp-2

The above theoretical account interprets that,

Positive associations are observed between our forecasters ( Turnover, Total Assets & A ; Stipend Rate for CA-Finalist ) & A ; the dependent variable I ; e audit fees.

With 1 unit addition in Reciprocal of entire assets, Ln of Reciprocal audit fee will increase by 657 units,

With 1 unit addition in Reciprocal of turnover, Ln of Reciprocal audit fee will increase by 1236 units,

With 1 unit addition in Reciprocal of Stipend-2, Ln of Reciprocal audit fee will increase by 3595 units,


Hypothesis appraisal is made on the consequences of important values obtained from proving each hypothesis on our informations.

Based on our Alpha of 0.05, hypotheses holding important values of greater than 0.05 were rejected & amp ; hence excluded from our concluding theoretical account.

Whereas, hypotheses with important values of less than 0.05 were found as important, therefore are accepted and included in our concluding theoretical account.

Therefore, H2, H3 & A ; H4 are rejected.

Whereas, important values for hypothesis of Total Assets, Turnover & A ; Stipend Rate were greater than 0.05, therefore we are unable to reject H1, H5 & A ; H6.

Chapter 5:


In this survey an effort was made to analyze a relation between audit fees & A ; some new variables such as Entity ‘s turnover, rising prices & A ; minimal stipend rates for trainees.

Like old research works & A ; surveies on audit fee, Total Assets, Current Ratio & A ; Leverage Ratio are found as the common variable in the finding of audit fee.

Consistent with the surveies of Mitra, Ferguson, Craswell variable such as entire assets was besides found as a important variable in fees finding for audit in Pakistani Market.

Furthermore, in the new variables incorporated, entity ‘s turnover & A ; Stipend Rate for CA-finalist were found as important variables in the finding of audit fee.

Whereas, other variables i ; e current ratio & A ; leverage ratio were found as an insignificant variable for the finding of audit fee in Pakistan.

In the terminal, we eventually conclude that, increase in minimal stipend rate over the last 2 old ages has important influence on audit fee finding.


The decision of this cram can be used by audit houses to analyze audit fee. Management of auditee companies can besides work the result of this survey to foretell the sum of audit fee that they will reimburse each twelvemonth.

In this regard, this survey contributes to the audit fee literature by analyzing an of import aspect of the audit fee economic sciences in a Pakistani market and provides an avenue for widening future audit fee research in this country.

Importantly, the survey can be used by audit houses for analysing & A ; foretelling their audit fees in future. As audit fee is the chief beginning of income for audit houses so it is really of import for them to maintain an oculus on the pros & A ; cons associated with the variable of audit fee.

Future Research:

Future research in the country of Audit Fees can be made more attractive & A ; worthwhile if sample size of the informations can be extended. With stipend rate as a important variable in audit fees finding, now more focal point can be made on this variable.

Due to position of audit houses as “ Partnership ” , limited or no information was available related the internal cost of these audit houses. Availability & A ; pertinence of that information in our thesis can add value to the decisions of our thesis.

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