The impact of fair value estimates on audit fees: evidence from the financial sector in Jordan
Journal of Accounting in Emerging Economies
ISSN: 2042-1168
Article publication date: 3 November 2020
Issue publication date: 19 March 2021
Abstract
Purpose
This study investigates the association between the estimates of fair value and external auditor's fees.
Design/methodology/approach
Based on a sample of 32 Jordanian financial companies listed on the Amman Stock Exchange (ASE) over the period 2005–2018. We employ random effect models to test our hypothesis.
Findings
We found a positive relationship between audit fees and the proportion of fair value assets, which implies that external auditors are more likely to spend more effort for complex estimates, thereby increasing audit fees. We examined the relationship between audit fees and three levels of fair value inputs and found a positive relationship between the level of effort spent on assessment of higher uncertainty fair value inputs and audit fees. The findings are consistent with the expectation that more audit effort is required in a highly regulated environment due to the possibility of a higher cost of litigation.
Practical implications
The findings of this study could be beneficial for a number of users of financial information, such as investors, regulators, auditors. This group of users might consider the results of this study when they are using a company's financial information, and consequently, better able to make the right decisions.
Originality/value
Although prior studies have researched fair value, no study to date among developing countries has investigated its relationship with audit fees. This study, therefore, provides new empirical evidence that the complexity and risk of fair value estimates significantly influences auditors' motivation to expend additional effort, resulting in higher audit cost.
Keywords
Acknowledgements
Retraction notice: The publishers of the Journal of Accounting in Emerging Economies wish to retract the article Alqatamin, R.M. and Ezeani, E. (2021), “The impact of fair value estimates on audit fees: evidence from the financial sector in Jordan”, published in the Journal of Accounting in Emerging Economies, Vol. 11 No. 2, pp. 176-193.It has come to our attention that there are significant similarities between this article, without attribution, and an earlier source by Esraa Esam Alharasis, (2021), ‘The Impact of Fair Value Disclosure on Audit Fees of Jordanian Listed firms’, PhD thesis, Victoria University, Melbourne.The Journal of Accounting in Emerging Economies submission guidelines make it clear that articles must be original and must not infringe any existing copyright. The publishers of the journal sincerely apologise to the readers. Both authors have confirmed that Ernest Ezeani contributed to the article in good faith and had no knowledge of a professional relationship between Rateb and Esraa Esam Alharasis.
Citation
Alqatamin, R.M. and Ezeani, E. (2021), "The impact of fair value estimates on audit fees: evidence from the financial sector in Jordan", Journal of Accounting in Emerging Economies, Vol. 11 No. 2, pp. 176-193. https://doi.org/10.1108/JAEE-09-2019-0184
Publisher
:Emerald Publishing Limited
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