Title Page

Declaration ii

Certification iii

Dedication iv

Acknowledgement v

Table of content vi

List of Tables viii

List of Appendices ix

Abstract x

CHAPTER ONE: INTRODUCTION

1.1 Background to the study 1

1.2 Statement of the Problem 3

1.3 Research Objectives 6

Research Questions 6

1.5 Research Hypothesis 6

1.6 Scope of the Study 7

1.7 Significance of the Study 7

CHAPTER TWO: LITERATURE REVIEW

2.0 Introduction 9

2.1 Concepts of Audit and Audit Fees 9

2.2 The Audit Expectation Gap and Audit Fees 21

2.3 Factors Affecting Audit Fee 22

2.4 Theories of Auditing 28

2.5 Empirical Review 31

3.0 Summary of Literature Review 37

CHAPTER THREE: RESEARCH METHODOLOGY

3.0 Introduction 38

3.1 Research design 38

3.2 Population and Scope of the Study 38

3.3 Sample Size and Sample Technique 39

3.4 Data collection method 40

3.5 Variables definition and measurement 40

3.6 Data Analysis 43

CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND INTERPRETATION

4.1 Introduction 46 4.2 Descriptive Statistics 46

4.3 Correlation Coefficients 49

4.4 Diagnostic Tests 52

4.5 Regression Analysis and Test of Hypotheses 55

4.6 Discussion of Findings and implication of the study 62

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION

5.0 Introduction 65

5.1 Summary 65

5.2 Conclusion and Recommendation 66

5.3 Contribution to Knowledge 68

5.4 Suggestion for Further Study 68

REFERENCES 71

APPENDICES 78

LIST OF TABLES

Table 3.1 Population of the Study   39

Table 3.2 Sample Size   39

Table 4.1 Descriptive Statistics   45

Table 4.2 Correlation Matrix 48

Table 4.3 Test for Data Normality 52

Table 4.4 Variance Inflation Factor (VIF) for Multicolinearity   53

Table 4.5 Hettest, Fixed-Random Specification, Random Effect and Fixed Effect     55

Table 4.6 Generalised Least Square Regression 56

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LIST OF APPENDICES

Appendix A Descriptive Statistics   78

Appendix B Pair-wise Correlation Coefficient   79

Appendix C Test for Data Normality   80

Appendix D Variance Inflation Factor for Multicolinearity   81

Appendix E Regression Analysis between Audit Fees and Audit Client Characteristics   82

Appendix F Regression Analysis between Audit Fees and Corporate Governance Codes  86

Appendix G Regression Analysis between Audit Fees and Audit Firm Characteristics   89 

  ABSTRACT

This study is aimed at ascertaining the effect of audit client characteristics, audit firm characteristics, corporate governance variables in the determination of audit fees of listed pharmaceutical firms in Nigeria. Panel research design was adopted for this study on  a population of eleven (11) listed pharmaceutical firms in Nigeria, out of which seven (7) firms were sampled for the study using purposive sampling technique for the period of six years from 2012-2017. Secondary data obtained from the published annual accounts and reports of Seven (7) listed pharmaceutical firms were used for this study. Descriptive and correlation analysis were also used to analyse the relationship between the independent variables (audit client size, profitability inherent risk, level of debt, board size, board independence, board diligence, audit tenure, audit type) in the three models with audit fee. Thereafter, multiple regression analysis was conducted using pooled ordinary least squares and the panel estimated generalized least squares. The result for audit firm characteristics revealed that there is a positive significant relationship between audit client size and audit fees; while profitability and level of debt of audit clients have an insignificant negative effect on audit fee. However, audit client’s inherent risk of has a positive insignificant effect on audit fees. This study also reveals the result of corporate governance variables that board diligence has a positive significant effect on audit fees, while board size and board independence have a negative insignificant effect on audit fees. The result from audit firm characteristics and audit fees revealed that audit tenure has a significant positive effect on audit fees, while audit type has a positive insignificant effect on audit fees. However, there are several limitations faced in this study which included the generalisation of the research finding and measurement tools used to define the independent variables. This study provides important insight on the determinants which are significantly related to audit fees paid by listed pharmaceutical firms in Nigeria and charged by the auditors which helps auditors in pricing the audit services appropriately. Also, regulatory bodies can use this research to regulate the practice of audit pricing.