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Title: The determinants of audit fees in the Maltese financial services industries
Authors: Pisani, Loradine
Keywords: Financial services industry -- Malta
Auditing -- Malta
Corporations -- Auditing
Auditing -- Mathematical models
Issue Date: 2016
Abstract: PURPOSE: The main objective of this study is to deduce the audit fee determinants for PIEs operating within the Maltese Financial Services industries, eliciting whether these are distinguished from the significant factors applicable to the Maltese non-financial sector. It is also the aim to determine whether such determinants vary across the financial sub-industries being banking, insurance and asset management. Lastly, the existence, or otherwise, of the Big 4 firms premium in the local scenario is investigated. DESIGN: Four GLM regression models are developed to examine the effect of a number of independent variables on the audit fees of the Financial Services companies collectively, and within each of the financial sub-industry. The main method is further corroborated by a series of semi-structured interviews held with audit partners and with audit clients across the three sectors. FINDINGS: This study reports that the driving forces of audit fees in the financial services industries include mainly the audit client’s size, complexity and the audit report lag. Particular to this sector, this research also evidences the significance of the fair value measurement, particularly Level 3 assets and non-audit fees. Results also show the emergence of specific variables on a sub-industry basis including reinsurance premium and listing status for insurance undertakings and the emergence of a Maltese-specific variable, namely the engagement of a foreign audit partner, within the banking sector. Also, the significant variables of auditee size and risks in each sub-sector are proxied by tailored surrogates. Finally, this study reports that Big 4 prices incorporate a premium over mid-tier firms in the banking and insurance sector. Only two of the upper-tier firms earn a premium within the listed CIS sector. However, no single firm can be considered as an industry specialist in any of the three sub-sectors. CONCLUSIONS: This study concludes that some of the determinants that drive audit fees in general industries do not apply to the financial services realm, whilst some emerging factors are peculiar to the latter industry. The hypothesis that audit fees determinants vary on a sub-industry basis is also confirmed, whereas Big 4 premium is found to be attributable to the Big 4 audit firms as a group and not to a single firm. VALUE: The strength of this study lies in the fact that it is the first one to investigate audit fee pricing in the Maltese Financial Services sector and its sub-industries.
Description: M.ACCTY.
Appears in Collections:Dissertations - FacEma - 2016
Dissertations - FacEMAAcc - 2016

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