Article: Determinants of audit fees for robust financial report reliability Journal: Journal for International Business and Entrepreneurship Development (JIBED) 2025 Vol.17 No.4 pp.512 - 537 Abstract: This study investigates the impact of testing internal control over Financial Reporting (ICFR) under SOX 404(b) on audit and consulting-like (non-audit) service fees changes over the 2000-2016 period, after controlling for factors including risk, operations, governance, gender, finances and firm size. Our findings indicate that ICFR 404(b) accounts for 30% of the increase in audit fees, and that accelerated filers' larger firms pay higher fees compared to non-accelerated filers' smaller firms. Auditors are paid for completing additional tests of internal controls, implying an improvement in the quality of internal audit control. A 19% reduction in non-audit fees was also observed, exerting pressure on external auditors to be less independent. Reduced risks and tightened governance policies indicate that increased audit fees are driven by gender and operational complexity factors. These are crucial outcomes for regulators to consider when designing policies to enhance transparency, resources allocation and maintaining stakeholders' interests. Inderscience Publishers - linking academia, business and industry through research

Title: Determinants of audit fees for robust financial report reliability

Authors: Said Elfakhani; Abdeljalil Ghanem; Bassima Hout; Yeran Baishan

Addresses: Department of Finance, Suliman S. Olayan School of Business, American University of Beirut, Beirut, Lebanon ' Department of Accounting, Suliman S. Olayan School of Business, American University of Beirut, Beirut, Lebanon ' Department of Accounting, Suliman S. Olayan School of Business, American University of Beirut, Beirut, Lebanon ' Department of Finance, Bang College of Business, KIMEP University, Almaty, Kazakhstan

Abstract: This study investigates the impact of testing internal control over Financial Reporting (ICFR) under SOX 404(b) on audit and consulting-like (non-audit) service fees changes over the 2000-2016 period, after controlling for factors including risk, operations, governance, gender, finances and firm size. Our findings indicate that ICFR 404(b) accounts for 30% of the increase in audit fees, and that accelerated filers' larger firms pay higher fees compared to non-accelerated filers' smaller firms. Auditors are paid for completing additional tests of internal controls, implying an improvement in the quality of internal audit control. A 19% reduction in non-audit fees was also observed, exerting pressure on external auditors to be less independent. Reduced risks and tightened governance policies indicate that increased audit fees are driven by gender and operational complexity factors. These are crucial outcomes for regulators to consider when designing policies to enhance transparency, resources allocation and maintaining stakeholders' interests.

Keywords: audit fees; corporate governance; ICFR 404(b); financial reporting; SOX2002; PCAOB.

DOI: 10.1504/JIBED.2025.152847

Journal for International Business and Entrepreneurship Development, 2025 Vol.17 No.4, pp.512 - 537

Received: 12 Feb 2025
Accepted: 19 Feb 2025
Published online: 13 Apr 2026 *

Title: Determinants of audit fees for robust financial report reliability

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