CLIENT BARGAINING POWER AND AUDIT FEES

ABSTRACT

This study empirically investigates the impact of client bargaining power on audit fees and audit quality over a period of 24 years (2000 to 2023). The objectives of the study were to determine whether client bargaining power (measured through client size, client economic significance, and ongoing auditor-client relationships) significantly affects audit fees and audit quality. The Fully Modified Least Squares (FMOLS) econometric analysis was employed for data analysis. The objective of the study were to find out whether client bargaining power in negotiations (NCBP), industry-specific differences (ISD), variations in client bargaining power (VCBP), and influence in client bargaining power(ICBP) significantly impact audit fees (ADF). In this study, it was revealed that industry specific difference (ISD) and influence in client bargaining power (ICBP) has a strong impact of audit fees while, variations in client bargaining power (VCBP) and Negotiations in client bargaining power (NCBP) was revealed to a weaker impact on audit fees. This study recommends that government and regulatory authority should formulate appropriate policy that will monitor auditing industries’ pattern of operation by ensuring that the right productive and assets bearing investments are embark upon. This will in no small measure develop the sector and impact positively on the growth and development of any country.