Reimbursement Costs of Auditing Financial Assets Measured by Fair Value Model in Jordanian Financial Firms’ Annual Reports

Esraa Esam Alharasis (), Ahmad Saleem Tarawneh, Maha Shehadeh, Hossam Haddad, Ahmad Marei and Elina F. Hasan
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Esraa Esam Alharasis: Department of Accounting, Faculty of Business, Mutah University, Al-Karak 61710, Jordan
Ahmad Saleem Tarawneh: Department of Accounting, Faculty of Business, Mutah University, Al-Karak 61710, Jordan
Maha Shehadeh: Department of Accounting, Faculty of Business, Middle East University, Amman 11831, Jordan
Hossam Haddad: Department of Accounting, Faculty of Business, Zarqa University, Al-Zarqa 13110, Jordan
Ahmad Marei: Department of Accounting, Faculty of Business, Middle East University, Amman 11831, Jordan
Elina F. Hasan: Department of Accounting, Faculty of Business, Middle East University, Amman 11831, Jordan

Sustainability, 2022, vol. 14, issue 17, 1-21

Abstract: This paper investigates the impact of financial assets measured by the fair value (F.V.) model, proxied by held-for-trading (H.F.T.), available-for-sale (A.F.S.), and the fair value option (F.V.O.), on reimbursement costs charged by external auditors in the context of the Jordanian finance industry. The study applied fixed-effects regression with a sample of 2408 firm-year observations of Jordanian firms from 2005 to 2018. The regression results confirmed that higher H.F.T. and A.F.S. of fair-valued assets were the primary cause of high audit fees; however, the F.V.O. had no significant impact. The impact of the F.V. model on audit reimbursement expenses has received little scholarly attention even in developing countries. The current study introduces an updated audit-fee model and new empirical evidence to provide more insights into this relationship and bridge a gap in the auditing literature. As a result, it investigates the impact of each fair-valued financial asset category on audit pricing for the first time. This research is unique in that it uses the F.V. model to investigate the association between each item of fair-valued financial assets and audit fees. The findings of this research provide current empirical information on the implication of the F.V. model in Jordan. The results contribute by guiding audit fee determinants in the context of Jordan, where there is no specific limit for audit fees determined by the government. The outcomes guide regulatory authorities in monitoring and regulating the audit profession and regulating the audit of F.V. model practices.

Keywords: fair value model; reimbursement costs; held-for-trading; available-for-sale; fair value option; middle east; Jordan (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:gam:jsusta:v:14:y:2022:i:17:p:10620-:d:897908

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