THE ROLE OF AUDIT FEES IN IMPROVING FINANCIAL PERFORMANCE: A CASE STUDY OF EIGHT SELECTED COMMERCIAL BANKS OF IRAQI STOCK EXCHANGE OVER THE PERIOD (2006 – 2020)
Keywords:
Audit Fees, Financial Performance, Commercial Banks, Iraq Stock Exchange
Abstract
The research aims to investigate the role of audit fees in improving financial performance for eight selected commercial banks of Iraqi Stock Exchange throughout the time period (2006 – 2020). To analyse data, the research utilised return on assets (ROA) and return on equity (ROE) as proxies of financial performance as dependent variables while audit fees as independent variable. Both statistical software namely EViews and Stata have been applied for panel data gathered from the financial statement of sample selected. The findings proved that there is a long-term association between the variables under research. According to Pedroni and Kao's results, audit fees and ROE are insignificantly negatively related, whereas audit fees have an insignificant positive relationship with ROA. The study reached a number of conclusions among which it became clear through the empirical research that there were many changes and economic challenges affecting ROA and ROE over the period studied. The research suggested the management of selected banks to appoint one of the big-four audit firms or the board of directors may choose an audit firm whose moral integrity and honesty are unquestionable
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References
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Syder, I.D. & Miebaka, B. (2022). Audit services and financial performance of Nigerian Insurance Firms, International Journal of Research Publication and Reviews, 3(2), 501–506.
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Ugwu, C., Aikpitanyi, L. & Idemudia.S. (2020). Effect of audit quality on market price of firms listed on the Nigerian stock market, Journal of Accounting and Taxation, 6(10), 61–70.
Xie, Z., Cai, C. & Ye, J. (2010). Abnormal Audit Fees and Audit Opinion – Further Evidence from China's Capital Market, China Journal of Accounting Research, 3, 51 – 70. https://doi.org/10.1016/S1755-3091(13)60019-2.
Zahid, R.M.A., Khan, M.K, Anwar, W. & Maqsood, U.S. (2022). The Role of Audit Quality in the ESG-Corporate Financial Performance Nexus: Empirical Evidence from Western European Companies, Borsa Istanbul Review, 22(2), 5200 – 5212.
Zhou, X., Lou, P., Wu, Y. & Zhang, L. (2022). Earnings Persistence and Abnormal Audit Fees, Discrete Dynamics in Nature and Society, 2022, 1 – 12
Ali, S. H., & Jameel, S. A. (2019). The Role of Liquidity Management in Profitability: Case Study of Five Selected Commercial Banks of Iraq Stock Exchange over the Period (2006 – 2016). Academic Journal of Nawroz University, 8(4), 267 – 282. https://doi.org/10.25007/ajnu.v8n4a470.
Alzaabi, H.S. & Nobanee, H. (2020). Analyzing the Performance of the Commercial Bank of Dubai. Abu Dhabi University.
Awinbugri, A.E. & Prince, G. (2019). The Impact of Audit Committees’ Meetings and Audit Fees on the Financial Performance of Listed Banks in Ghana. International Journal of Research and Innovation in Social Science (IJRISS), 3(5), 341 – 346.
Carmichael, D. (2004). The PCAOB and the Social Responsibility of the Independent Auditor, Accounting Horizons - Account Horiz, 18. 127-133. 10.2308/acch.2004.18.2.127.
Elewa, M.M. and El-haddad, R. (2019). The effect of audit quality on firm performance: A panel data approach. International Journal of Accounting and Financial Reporting, 9(1), 229–244.
Enekwe, C., Nwoha, C. & Udeh, S.N. (2020). Effect of Audit Quality on Financial Performance of Listed Manufacturing Firms in Nigeria, Advance Journal of Management, Accounting and Finance, 5(1), 1 – 12.
Enofe, A.O., Mgbame, C., Okunega, E.C. & Ediae, O.O. (2013). Audit quality and Auditors Independence in Nigeria: An Empirical Evaluation, Research Journal of Finance and Accounting, 4(11), 131 – 138.
Ezenwoke, D.A., Efobi, U.R. & Iyoha, F. (2020). Modeling Audit fees of Nigerian banks, Vision 2020: Sustainable growth, Economic development and Global competitiveness.742 –756.
Freeman, R. E. (1984). Strategic Management: A Stakeholder Approach, Boston: Pitman.
Gandía, J.L. & Huguet, D. (2021). Audit Fees and Earnings Management: Differences Based on the Type of Audit, Ekonomska Istraživanja / Economic Research, 34, 2628 – 2650. 10.1080/1331677X.2020.1836990.
Hassan, S.U. & Farouk, M.A. (2014). Audit Quality and Financial Performance of Quoted Cement Firms in Nigeria, European Journal of Business and Management, 6, 73-82.
Iliemena, R.O.C. & Okolocha, C.B. (2019). Effect of audit quality on financial performance: Evidence from developing capital market, International Journal of Recent Research in Commerce, Economics and Management, 6(3), 191-198.
Isa, U., Gurama, Z. & Murtala, S. (2020). The Impact of Board Characteristics on Firm Performance in Nigeria, International Journal of Business Technopreneurship, 10(1), 57-68.
Ivungu, J.A., Anande, K.G. & Ogirah, A.U. (2019). Effect of Audit Quality on Firm Performance: A Review of Literature, International Journal of Advanced Academic Research, 5(6), 1 – 13.
Jensen, M.C. & Meckling, W.H. (1976). Theory of the Firm: Managerial Behavior, Agency Costs and Ownership Structure, Journal of Financial Economics, 3, 305 – 360. 10.1016/0304-405X(76)90026-X.
Kalbuana, N., Suryati, A. & Pertiwi, C.P. (2022). Effect of Company Age, Audit Quality, Leverage and Profitability on Earnings Management, International Journal of Economics, Business and Accounting Research (IJEBAR), 6(1), 389 – 399.
Khan, M.N., Parksh, R., Shamim, O. and Ali, S. (2021). Does Audit Quality Matter for Firm Performance? Empirical Evidence from Pakistani Public Listed Companies, Elementary Education Online, 20(5), 3953–3960. doi: 10.17051/ilkonline.2021.05.434.
Limperg, T. (1985). The Social Responsibility of the Auditor: A Basic Theory on the Auditor's Function by Professor Theodore Limperg (1879-1961) of the University of Amsterdam, with Some Recent Comments. 1 – 46.
Matoke, V.N. & Omwenga, D.J. (2016). Audit Quality and Financial Performance of Companies Listed in Nairobi Securities Exchange, International Journal of Scientific and Research Publications (ISSN: 2250-3153), 6(11), 372 – 381.
Mohamad, I. & Bakr, D. (2020). The Effect of Using the Accounting Information System in Improving the Organization's Performance, International Journal of Psychosocial Rehabilitation, 24. 7745-7755. 10.37200/IJPR/V24I6/PR260783.
Moutinho, V., Cerqueira, A. & Brandão, E. (2012). Audit Fees and Firm Performance, SSRN Electronic Journal, 1 – 30. 10.2139/ssrn.2180020.
Olutokunbo, O.T., Yisa, A. & Abdullahi, J.S. (2020). Corporate characteristics, audit fees and the Nigerian corporate environment: A panel data approach, European Journal of Accounting, Auditing and Finance Research, 8(9), 78–97.
Orji, U.O. (2022). Does Audit Fee Influence Financial Performance? Evidence from Deposit Money Banks in Nigeria, Academic Journal of Current Research, 9(9), 161–171.
Santos, C.A., Cerquiera, A. & Brandao, E. (2015). Audit fees, non-audit fees and corporate performance, FEP working papers, School of Economics and Management, University of Porto.
Sayyar, H., Basiruddin, R., Abdulrasid, S.Z. & Elhabib, M.A. (2015). The Impact of Audit Quality on Firm Performance: Evidence from Malaysia, Journal of Advanced Review on Scientific Research, 10(1), 1–19.
Serem, D; Fwamba, R. & Benedict, A (2020). Audit fees and financial performance of Deposit taking Saccos in North Rift, Kenya, International Journal of Innovation and Economic Development, 6(5), 15–27.
SMII, T. (2016). The Impact of the Audit Quality on that of The Accounting Profits: The Case of Companies Listed on the TSE, International Journal of Managing Value and Supply Chains. 7(1), 39-54. 10.5121/ijmvsc.2016.7104.
Soyemi, K.A. & Olowookere, J. K. (2013). Determinants of External Audit Fees: Evidence from the Banking Sector in Nigeria. Journal of Finance and Accounting, 4(5), 50–58.
Syder, I.D. & Miebaka, B. (2022). Audit services and financial performance of Nigerian Insurance Firms, International Journal of Research Publication and Reviews, 3(2), 501–506.
Trejo-Pech, C., Noguera, M. & White, S. (2015). Financial Ratios used by Equity Analysts in Mexico and Stock Returns, Contaduría y Administración, 60(3), ISSN: 0186-1042. 49. 10.1016/j.cya.2015.02.001.
Ugwu, C., Aikpitanyi, L. & Idemudia.S. (2020). Effect of audit quality on market price of firms listed on the Nigerian stock market, Journal of Accounting and Taxation, 6(10), 61–70.
Xie, Z., Cai, C. & Ye, J. (2010). Abnormal Audit Fees and Audit Opinion – Further Evidence from China's Capital Market, China Journal of Accounting Research, 3, 51 – 70. https://doi.org/10.1016/S1755-3091(13)60019-2.
Zahid, R.M.A., Khan, M.K, Anwar, W. & Maqsood, U.S. (2022). The Role of Audit Quality in the ESG-Corporate Financial Performance Nexus: Empirical Evidence from Western European Companies, Borsa Istanbul Review, 22(2), 5200 – 5212.
Zhou, X., Lou, P., Wu, Y. & Zhang, L. (2022). Earnings Persistence and Abnormal Audit Fees, Discrete Dynamics in Nature and Society, 2022, 1 – 12
Published
2023-06-20
How to Cite
BAKR , D. J., ALI , S. H., & JAMEEL, S. A. (2023). THE ROLE OF AUDIT FEES IN IMPROVING FINANCIAL PERFORMANCE: A CASE STUDY OF EIGHT SELECTED COMMERCIAL BANKS OF IRAQI STOCK EXCHANGE OVER THE PERIOD (2006 – 2020). Journal of Duhok University, 26(1), 634-645. https://doi.org/10.26682/hjuod.2023.26.1.39
Section
Humanities and Social Sciences
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