Examining the relationship between audit committee effectiveness and audit fees: An empirical investigation on companies listed in the UAE financial markets

Abstract

This study seeks to understand the relationship between audit committee effectiveness and audit fees. Prior literature suggests two perspectives to explain this relationship; the first is demand based whereas a positive relationship is expected, while the second is audit risk which propose a negative relationship between the two variables. In order to test the relationship between the two variables, data were collected from 64 companies listed in Abu Dhabi Securities Exchange and Dubai Financial Market. Univariate and multivariate analyses were conducted to test the hypotheses of the study. Results showed that audit committee effectiveness has a significant positive impact on audit fees. This result supports the demand based perspective to explain the relationship between audit committee effectiveness and audit fees. Also, a significant positive relationship is reported for number of meeting of audit committees and audit committee members financial expertise with audit fees.