Earnings Management, Board Independence And Audit Fees Considering The Firm’s Profitability Level – Conclusion

Earnings Management, Board Independence And Audit Fees Considering The Firm’s Profitability Level - ConclusionTable 5 shows the results of regression model. The following table shows the final model. Due to the above results, the final regression equation is:
Audit fees = 3.473 + 0.180SIZE+ 0.347AUD + 0.007ACA – 0.441BoDIND + 0.009ListAGE
Table 6 shows descriptive statistics. The results show audit fee in the low profitability level is 5.31 and in the up profitability level is 5.87. Therefore, audit fees in the up profitability level are higher than the other level.
Table 7 shows homogeneity of variances. The results of the levene statistics indicate that the significant level is.062, so it means that the group variances are homogeneous.
Table 8 shows meaningfulness of audit fees between groups and within groups. The results show that audit fees are meaningful at the 0.99 level. Therefore, there is a significant difference between audit fees in different firms.
Table 9 reports multiple comparisons of the audit fees in different profitability levels. It shows that the mean difference is significant in different levels. The results suggest that in the up profitability level the mean difference of the audit fees is significantly higher than the other levels.
Figure 1 shows the mean of audit fees in the different levels of profitability. The results show that the mean of audit fees in higher profitability firms is higher than other firms. itat on
This study investigated the relationship between earnings management, board independence and audit fees considering the firm s profitability level. Company size, type of auditor, listing age, remark, leverage, current ratio, loss and return on assets are the control variables. Results of the study explain that there is a positive and meaningful relationship between earnings management and audit fees. Discretionary accruals play an important role in earnings management. Discretionary accruals are related to accounting estimates that have high inherent risk. As such, the price of auditing increases. Therefore, high earnings management increases the price of audit fees. The results are in accordance with the study of Alali. Also, there is a negative and meaningful relationship between board independence and audit fees. Independent corporate boards provide an effective monitoring mechanism that reduces control risk and scope of audit work. The results suggest that board independence decreases audit fees through a reduction in the price of audit risk. The results are in accordance with the study of Tsui et al. and Griffin et al.. The results show that there is a meaningful difference between audit fees with respect to the firm s profitability level. It means that highly profitable firms pay higher audit fees. Therefore, the higher level of profitability, the higher the audit fees.
Due to the results, the determination of audit fees is very important for auditors and managers; because managers have incentives to manipulate earnings. With regard to corporate characteristics, auditors can price their fees in better manner.

Table-7: Test of Homogeneity of Variances

Leven Statistic df1 df2 Sig.
2.796 2 396 0.062

Table-8:One-way ANOVA

AF Sum of Squares df Mean Square F Sig.
Between Groups 16.274 2 8.137 19.947 0.000
Within Groups 161.543 396 0.408
Total 177.817 398

Table-9:Multiple Comparisons (Dependent Variable: AF)

Mean Difference (I-J) Std.Error Sig. 95% Confidence Interval
(I)TYPE (J)TYPE LowerBound UpperBound
Lowprofitability Low Profitability
Middle Profitability ж-0.21 0.078 0.006 -0.37 -0.06
Up Profitability -0.56* 0.090 0.000 -0.74 -0.39
MiddleProfitability Low Profitability 0.21* 0.078 0.006 0.06 0.37
Middle Profitability
High Profitability -0.35* 0.078 0.000 -0.50 -0.19
HighProfitability Low Profitability 0.56* 0.090 0.000 0.39 0.74
Middle Profitability 0.35* 0.078 0.000 0.19 0.50
High Profitability


Fig. 1- Comparing audit fees between profitability groups

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