Journal of Management Information and Decision Sciences (Print ISSN: 1524-7252; Online ISSN: 1532-5806)


Audit Pricing Determinants in the Jordanian Banking Sector: Transaction Cost Perspective

Author(s): Munther Al-Nimer, Amal Hasan

The study aimed to investigate the relationship between TC and audit pricing after controlling other determinants. It redounds on how the control variables (firm size, firm financial performance, firm capital structure, and firm complexity) will impact audit pricing. Moreover, it aimed to understand the need to reduce the TC and how this will impact audit pricing. In addition to content analysis, the study relied on a quantitative approach to examine the impact of TC on audit pricing. This approach includes numeric data collection and the research’s tendency to use mathematical models as the methodology of data analysis for the period between 2007and 2016. The study revealed that interest expenses and other expenses have reflected a statistically significant impact on audit pricing. The aforementioned expenses are expected to have a high impact on audit pricing as these require extra effort from the auditor, which leads the latter to imposing high audit pricing. The study indicated that bank size is the main determinant of audit pricing and that it has a statistically positive significant impact on audit pricing, In terms of the effect of financial performance on both audit pricing and TC, the study indicated that financial performance affect both audit pricing and TC negatively. Moreover, the study revealed that the negative significance of receivables can be attributed to the same reason as that of capital structure as a strong control over receivables showed the importance of internal control that could decrease audit pricing, Finally, the study concluded that the variables found to highly affect audit pricing-interest expense as a direct TC and other expenses as indirect TC-should be added to the audit pricing model. Besides, firm size, capital structure and complexity could be taken in consideration as control variables for examining both TC and audit pricing.

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