Audit quality, firm value and audit fees: does audit tenure matter? Egyptian evidence

Abstract

Purpose

This study aims to investigate the impact of audit fees on audit quality, the impact of audit quality on firm value and whether these effects are conditional on audit tenure by bringing evidence from an emerging market.

Design/methodology/approach

Different regression techniques are used, such as logistic regression, probit regression, ordinary least squares regression and fixed effects regression. The authors used panel data of 80 nonfinancial Egyptian-listed firms over 2016–2020.

Findings

The authors found a significant positive relationship between audit fees and audit quality and a significant positive relationship between audit quality and firm value. Furthermore, the authors found that the positive relationship between audit fees and audit quality is less pronounced for higher audit tenure firms. Finally, the authors also found that the positive relationship between audit quality and firm value is stronger for lower audit tenure firms.

Originality/value

To the best of the authors’ knowledge, this is the first study to bring evidence from an emerging African market about the joint association between audit tenure, audit fees, audit quality and firm value. It provides beneficial insights to regulators regarding the possibility and the benefits of improving audit quality, which is critically needed in contexts with weak governance systems.

Citation

Saleh Aly, S.A., Diab, A. and Abdelazim, S.I. (2023), "Audit quality, firm value and audit fees: does audit tenure matter? Egyptian evidence", Journal of Financial Reporting and Accounting, Vol. ahead-of-print No. ahead-of-print. https://doi.org/10.1108/JFRA-04-2023-0203