The Effect of Capital Structure and Cash Holdings on Audit Fees.

Articles in Press

Document Type : Original Article

Author

Assistant Professor of Accounting, Islamic Azad University, Kerman Branch, Kerman, Iran.

10.22034/iaas.2022.310498.1191

Abstract

The main purpose of this research is to investigate the impact of capital structure and the amount of cash retention on audit fees. In this regard, the debt ratio is used to measure the capital structure, and the ratio of cash plus short-term investments to the book value of the company's assets is used to measure the level of cash retention. For this purpose, a sample consisting of 1625 companies admitted to the Tehran Stock Exchange during the years 2008-2020 has been investigated using multivariate regression. The results of the research show that with the increase in the debt-based capital structure ratio, the control of external suppliers and creditors increases compared to the owners. Thus, with the increase of this ratio, the external creditor in order to reduce information asymmetry and conflict of interest has demanded an increase in transparency, more effort and seriousness of the audit work, which leads to an increase in auditors' fees. Also, the research results showed that keeping other factors constant, cash retention has a positive and significant effect on audit fees and reflects the fact that auditors react to different levels of companies' cash retention, which is one of the sources of agency costs.. . . . . . . . . . .. . . . . . .

Keywords

Main Subjects

Accounting and Auditing Studies

Articles in Press, Accepted Manuscript
Available Online from 24 July 2023

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