The determinants of audit fees for companies in Vietnam

is accepted. This result is similar to 
many previous researches on audit fees such 
as the research of Yidi Xu (2011), Wang, O. 
and Chu (2013), Amba and Al-Hajeri (2013), 
Simunic (1980), Chan, Ezzamel and Gwilliam 
(1993). It can be explained that to minimize the 
detected risk and achieve the audit objectives, 
the auditors have to go to every subsidiary, 
branch, associate, affiliate and joint venture 
of the company to conduct the audit. And this 
will definitely cost many audit tasks, much au-
dit time and costs in the audit process. There-
fore, this may be one of the reasons why audit 
companies have to consider auditee complexity 
when determining the audit fee for public com-
panies in Vietnam.
The research results demonstrate that the to-
tal receivables and inventories divided by total 
assets influence the audit fee insignificantly, so 
hypothesis H3, which assumes that if the com-
pany’s total receivables and inventories divid-
ed by total assets are larger, the audit fee will 
Table 4: Regression result
Unstandardized Coefficients Standardized Coefficients t Sig. 
B Std. Error Beta 
(Constant) 13.738 1.376 9.985 0.000 
SIZE 0.153 0.052 0.316 2.923 0.005 
COMPLX 0.055 0.017 0.350 3.283 0.002 
REC&INV 0.105 0.237 0.043 0.443 0.660 
LIABI 0.042 0.238 0.018 0.176 0.861 
OPINION 0.060 0.190 0.030 0.313 0.756 
SECTO -0.113 0.123 -0.089 -0.919 0.362 
ROE -0.169 0.253 -0.071 -0.666 0.508 
LOSS -0.050 0.137 -0.037 -0.366 0.715 
BIG4 0.596 0.282 0.219 2.118 0.038 
LAG 0.003 0.003 0.092 0.906 0.368 
Journal of Economics and Development Vol. 19, No.2, August 201783
be higher, is rejected. This result is similar to 
the research of Yidi Xu (2011) and Wang, O. 
and Chu (2013). And the reason for this result 
is that the auditors may not consider the re-
ceivables and inventories as two complicated 
accounts to audit. Based on Yidi Xu (2011), re-
ceivables and inventories are usually used for 
earning management and are easier to manipu-
late by managers because the judgment of man-
agers could have a large impact on the value of 
these two accounts as fair value or realizable 
value. Therefore, these accounts become unre-
liable and in order to decrease the audit risk, 
prudent auditors would choose not to rely on 
this ratio to determine the audit risk that in turn 
influences the audit fee.
Similarly, based on the significance level 
(Sig.), the total liabilities divided by total as-
sets influences the audit fee insignificantly 
and this is why hypothesis H4 is rejected. As 
a matter of fact, this result is contrary to the 
authors’ expectation, because in reality, when 
the company has a high leverage ratio, it would 
be the motivation for managers to manipulate 
their financial statements to impress the debt-
ors and avoid debt covenant violation. This 
would lead the audit risk to increase and thus 
the audit fee. Nevertheless, based on the data in 
Vietnam, this result is not suitable for the above 
explanation from the agency theory and also is 
different from most of the prior researches.
The audit opinion is also one of the factors 
influencing the audit fee insignificantly based 
on the research result of the significance level 
(Sig.), so hypothesis H5 is rejected. This result 
is similar to many previous researches such as 
Vakilifard, Ebrahimi, Sadri, Davoodi and Al-
lahyari (2014), Yidi Xu (2011), Wang, O. and 
Chu (2013). The main reason for this result is 
because the audit opinion in the audit report 
is expressed after the audit contract is signed. 
This means after determining the audit fee and 
signing the audit contract with the auditee, the 
audit company conducts the audit process and 
after that, the auditors express the audit opin-
ion in the audit report. Moreover, because of 
the intense competition among audit compa-
nies, although the business and financial risk 
of the auditee may be high, some audit compa-
nies have the tendency towards the unqualified 
audit opinion when signing a contract with the 
auditee because they do not want to lose cus-
tomers. That is why somehow the audit fee is 
not affected significantly by the audit opinion.
Hypothesis H6, which assumes that if a com-
pany operates in the real estate sector, the audit 
fee will be higher than for at company operat-
ing in another sector, is rejected, because based 
on the significance level (Sig.), the business 
sector influences the audit fee insignificantly. 
The reason for this result is that although the 
different business sectors have different com-
plexities and risk levels, most public compa-
nies are operating in many business sectors at 
the same time. Therefore, this could be one of 
the reasons why the audit companies consider 
other factors to determine the audit fee instead 
of the business sector.
Hypothesis H7, which assumes that if a 
company has a lower return on equity (ROE), 
the audit fee will be higher, and hypothesis H8, 
which assumes that if a company has a continu-
ous loss in three recent years, the audit fee will 
be higher, are two hypotheses relating to the 
financial conditions of auditees. Based on the 
research result, the two hypotheses are rejected 
Journal of Economics and Development Vol. 19, No.2, August 201784
because two variables, which are ROE and the 
dummy variable, whether the auditee has had 
loss in three recent years, influences the audit 
fee insignificantly. In order to explain this re-
sult, Chan, Ezzamel and Gwilliam (1993) have 
given two reasons. Firstly, the audit companies 
could not know the importance of these factors 
clearly in the audit process and when determin-
ing the audit fee. Secondly, for the purpose of 
enhancing their reputation and finding more 
customers, audit companies might reduce the 
audit fee for the auditee having bad financial 
conditions, and this leads the influence level of 
financial conditions of the auditee on the audit 
fee to decrease. Lastly, there are some proba-
bilities that the managers of the auditee com-
pany could manipulate these financial ratios 
and profits to boost their bonuses or impress 
outside investors by earnings management, so 
these ratios become more unreliable and that 
could be one of the reasons why the auditors 
still consider these factors but not take these as 
an important factors to decide the audit fee.
Moreover, hypothesis H9, which assumes 
that if a company has been audited by a Big 
4 auditing company, the audit fee would be 
higher than for a company audited by another 
audit company, is accepted because based on 
the significance level (Sig.), the reputation of 
audit companies influences the audit fee sig-
nificantly. The first reason for this result given 
by Chan, Ezzamel and Gwilliam (1993) is that 
thanks to experienced and professional audi-
tors, the audit quality of Big 4 companies might 
be high and this leads to the audit fee increase. 
The second reason given by Yidi Xu (2011) is 
that the larger the public companies, the high-
er the demand for quality financial statements, 
and this leads to the demand for signing with 
large audit companies to increase. And the 
last reason is that in accordance with Yidi Xu 
(2011), it is not sure to conclude that the audit 
fee of Big 4 companies is high because the au-
dit quality of Big 4 companies is higher than 
the other audit companies, but maybe because 
of the influence of the reputation of audit com-
panies in the competitive market of audit fees.
Lastly, hypothesis H10, which assumes that 
if the audit report lag of the company is longer, 
the audit fee will be higher, is rejected, because 
the audit report lag influences the audit fee in-
significantly based on the research result. The 
reason for this result is that the audit fee is de-
termined by the audit company when signing 
the audit contract with the auditee and this has 
happened before the auditors issue the audit re-
port. Therefore, this may be one of the reasons 
why the audit report lag influences the audit fee 
insignificantly.
6. Conclusions and recommendations
6.1. Conclusions
For the purpose of researching the deter-
minants of audit fees for public companies in 
Vietnam, some important previous content will 
be summarized as follows:
Firstly, two theoretical frameworks for the 
existence of auditors are introduced. These 
are agency theory and information asymmetry 
theory. The agency theory indicates the bene-
fit conflict between the agent and the principal, 
particularly the shareholders and the managers. 
In order to prevent abnormal behaviors of man-
agers which can harm the benefit and wealth 
of shareholders, the shareholders have built 
some monitoring procedures and one of these 
procedures is the audit. However, to build these 
Journal of Economics and Development Vol. 19, No.2, August 201785
procedures, the shareholders have to pay costs, 
which are called the agency costs, and the au-
dit fee is one of the components of the agency 
costs. Whereas the information asymmetry in-
dicates that although the shareholders are the 
actual owners of the company, they do not have 
access to all internal information about the fi-
nancial and business condition of company, 
but only know through the financial statements 
created by the managers. Therefore, in order to 
guarantee the quality of financial statements, 
the shareholders need the auditors to confirm 
whether there are any material misstatements 
in the financial statements. And the sharehold-
ers have to pay the audit fee for the auditors.
Secondly, according to the previous re-
searches, the opinions about audit fees are sum-
marized in many aspects. Besides, this study 
introduces some different measurements of the 
determinants of audit fees in previous research-
es, and analyzes them to find the best measure-
ment for the research model. Moreover, the dif-
ferent opinions about the relationship between 
the determinants and audit fees are the basics to 
build the research hypotheses.
Then, the research methodology is given in 
this study. Moreover, the research model is pro-
posed with the measurements of the dependent 
variable and independent variables, and the re-
search hypotheses are built based on the previ-
ous researches.
After that, the research model is analyzed 
based on the research methodology as pre-
sented. After analyzing the correlation among 
variables through the correlation coefficient, 
the research model is completely relevant to 
the overall data, and the regression relation-
ship between the independent variables and 
the dependent variable is analyzed by the OLS 
method. The result shows that only three of ten 
variables influence the audit fee significantly. 
To explain this result, this study compares the 
result with the other researches and discusses 
some reasons based on the previous researches.
Finally, some recommendations are pro-
posed to improve the effectiveness of audit 
fee determination and some limitations and re-
search directions in the future are recommend-
ed.
6.2. Recommendations
Based on the research result, two recommen-
dations are proposed for the state institutions 
and audit companies to improve the effective-
ness of audit fee determination as follows:
Firstly, the state institutions need to pro-
pose some specific regulations about the basis 
for determining audit fees. At the moment, the 
regulations about audit fees are only proposed 
in Article 41 of the Independence audit Law 
(2011), which has generally explained that the 
audit fee has to depend on the audit tasks or 
the audit time. However, the audit fee does not 
depend only on the characteristics of the audit 
tasks, but also depends on the characteristics of 
the auditee as to the business and financial con-
ditions. Particularly, the research result of this 
study has proved that besides the characteris-
tics of audit companies, the audit fee for public 
companies in Vietnam also depends on the au-
ditee size and auditee complexity. But because 
the state institutions have not already proposed 
a basis for determining audit fees, including the 
characteristics of the auditee, some audit com-
panies would not be concerned about the risk 
characteristics when determining the audit fee. 
Therefore, in order to minimize unfair com-
Journal of Economics and Development Vol. 19, No.2, August 201786
petition in the audit market when some audit 
companies reduce their audit fee lower than the 
minimum fee for one audit process, the state 
institutions have to propose a more specific ba-
sis to determine the audit fee, not only the basis 
relating to the audit tasks or the experience of 
auditors, but also the basis relating to the char-
acteristics of the auditees.
Secondly, besides the audit fee, the audit 
companies have to inform the auditees about 
the basis for calculating the audit fee. Because 
no one knows the auditee more clearly than the 
auditees, this would help the audit companies 
get much relevant information to determine the 
audit fee and build the audit process. Therefore, 
informing the auditees about the basis used for 
calculating the audit fee would be similar to 
taking the opinions of the auditees about their 
own business conditions and inherent risks.
7. Limitations and research directions in 
the future
Firstly, one limitation of this study is the 
sampling size, because in reality there are not 
many public companies in Vietnam announc-
ing their audit fees like other countries in the 
world, this is why it is difficult to collect data 
and the sampling size is not large. Therefore, 
future research on the determinants of audit 
fees may overcome the difficulty about collect-
ing the data and the sampling size will increase. 
Secondly, the question as to whether the audit 
fee is related to the audit quality is still under 
discussion and has to be researched specifically 
in the future. Finally, the competitive market 
of audit fees in Vietnam and the determinants 
of the competitive market of audit fees have to 
be researched thoroughly and specifically, so 
this research topic should be concerned to pro-
pose some useful recommendations to build a 
healthy competitive environment for audit fees 
in Vietnam.
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