Title Page

Declarationii

Certificationiii

Dedicationiv

Acknowledgementv

Table of contentvi

List of Tablesviii

List of Appendicesix

Abstractx

CHAPTER ONE: INTRODUCTION

1.1Background to the study1

1.2 Statement of the Problem3

1.3Research Objectives6

Research Questions6

1.5 Research Hypothesis6

1.6Scope of the Study7

1.7Significance of the Study7

CHAPTER TWO: LITERATURE REVIEW

2.0 Introduction9

2.1Concepts of Audit and Audit Fees9

2.2The Audit Expectation Gap and Audit Fees21

2.3Factors Affecting Audit Fee22

2.4Theories of Auditing28

2.5Empirical Review31

3.0 Summary of Literature Review37

CHAPTER THREE: RESEARCH METHODOLOGY

3.0 Introduction38

3.1 Research design38

3.2 Population and Scope of the Study38

3.3Sample Size and Sample Technique39

3.4Data collection method40

3.5 Variables definition and measurement40

3.6Data Analysis43

CHAPTER FOUR: DATA PRESENTATION, ANALYSIS AND INTERPRETATION

4.1 Introduction46 4.2 Descriptive Statistics46

4.3Correlation Coefficients49

4.4Diagnostic Tests52

4.5Regression Analysis and Test of Hypotheses55

4.6Discussion of Findings and implication of the study62

CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATION

5.0 Introduction65

5.1Summary65

5.2Conclusion and Recommendation66

5.3Contribution to Knowledge68

5.4Suggestion for Further Study68

REFERENCES71

APPENDICES78

LIST OF TABLES

Table 3.1Population of the Study  39

Table 3.2Sample Size  39

Table 4.1Descriptive Statistics  45

Table 4.2 Correlation Matrix 48

Table 4.3Test for Data Normality 52

Table4.4Variance Inflation Factor (VIF) for Multicolinearity  53

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

Table 4.6Generalised Least Square Regression 56

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LIST OF APPENDICES

Appendix ADescriptive Statistics  78

Appendix BPair-wise Correlation Coefficient  79

Appendix CTest for Data Normality  80

Appendix DVariance 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 GRegression 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.