Impact of Corporate Governance on Audit Fee: Empirical Evidence from Pakistan

Abstract

The breakdown of world well known corporate giants such as Adelphia, WorldCom, Enron and Parmalat has resulted in an increasing attention to corporate governance mechanism. Even in Pakistan, some scandals have occurred, for example Pakistan PTCL privatization & Mehran Bank Frauds; an analogous could be drawn, detonating that these scandals have resulted in increased attention to audit and regulatory committees to ensure the soundness of publicly available financial information and to serve for the purpose of accountability over the firm activities. Therefore, the current study aims to examine the relationship between corporate governance and audit fee in Pakistan. For this purpose panel regression is used to analyze the relationship between corporate governance and audit fee of 37 publically traded firms listed at Karachi Stock Exchange (KSE), during 2009-2012. Results show that corporate governance, firm size and leverage have a positive relationship with audit fee. Moreover, results also demonstrate that audit firm size is insignificantly related to audit fee. The implications and limitations of the study have also been discussed.

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