Audit Fee Modelling & Corporate Governance in a South Asian Context

Making Corporate Governance Work: Towards Reforming the Ways We Govern Conference, January 2010

20 Pages Posted: 23 Oct 2011  

Yousuf Khan

London South Bank University

Kenneth Edgar D'Silva

London South Bank University - Centre for Research in Accounting

Date Written: January 1, 2010

Abstract

Corporate Governance is a multi-faceted phenomenon. The Cadbury Report (1992) describes it as the “system by which companies are directed and controlled” stating that corporate “boards are responsible for the governance of their companies”. Boards set financial policy and oversee its implementation. This includes the use-monitoring of financial controls - a key aspect of which is the Economical, Effective, Efficient and Ethical (4E) disbursement of all corporate funds.

External auditors provide an objective, credible and outside opinion on the directors’ (usually annual) financial report to stakeholders – primarily shareholders. Thus, disbursement of funds in respect of the audit function must be a particular concern for boards.

Consequently, the paper focuses only on a particular aspect of financial governance – i.e. the audit fee disbursement - against which such 4E features must be considered. It does this by taking regard for several normative models of audit fees - drawn from an appropriate range of literature-settings and developing one from a South Asian economy (i.e. Pakistan).

The paper is structured within six sections. The first merely explores a seminal offering in terms of audit fee modelling and refers to some important early examples within a more international context. The next (second) section considers attempts to model audit-fees in a mainly Middle Eastern context. The following (third) section highlights comparable research in a South Asian context and the section then following (fourth) presents an empirical exercise of modelling audit fees in a Pakistani context. The final sections (fifth and sixth) discuss the results emerging from the Pakistani audit-fee model and conclude with related policy implications and governance issues while offering suggestions for further research.

Keywords: Audit Fee Modelling, Corporate Governance, South Asia

JEL Classification: G30

Suggested Citation

Khan, Yousuf and D'Silva, Kenneth Edgar, Audit Fee Modelling & Corporate Governance in a South Asian Context (January 1, 2010). Making Corporate Governance Work: Towards Reforming the Ways We Govern Conference, January 2010. Available at SSRN: https://ssrn.com/abstract=1942393

Yousuf Khan (Contact Author)

London South Bank University ( email )

103 Borough Road
London, Greater London SE1 OAA
United Kingdom

Kenneth Edgar D'Silva

London South Bank University - Centre for Research in Accounting ( email )

103 Borough Road
London, SE1 0AA
United Kingdom

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