The Relationship between Intellectual Capital and Audit Fees

Mahmoud Lari Dashtbayaz (), Amjed Hameed Mezher, Khalid Haitham Khalid Albadr and Bashaer Khudhair Abbas Alkafaji
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Mahmoud Lari Dashtbayaz: Department of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad 9177948974, Iran
Amjed Hameed Mezher: Department of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad 9177948974, Iran
Khalid Haitham Khalid Albadr: Department of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad 9177948974, Iran
Bashaer Khudhair Abbas Alkafaji: Department of Economics and Administrative Sciences, Ferdowsi University of Mashhad, Mashhad 9177948974, Iran

JRFM, 2023, vol. 16, issue 2, 1-28

Abstract: The present study investigates whether intellectual capital (IC) is related to audit fees and financial statement restatements in companies listed on the Iraq Stock Exchange (ISE). The present study is a pioneer investigation of this topic in emerging markets. Using a sample of all listed companies on the ISE from 2014 to 2020, the research hypotheses are tested with multiple regression based on panel data and the fixed-effects model. The results demonstrate that intellectual capital is positively and significantly related to normal and abnormal audit fees. Moreover, findings indicate direct and significant relationships between intellectual capital components and normal and abnormal audit fees. This means investment in IC components is likely to determine the auditors’ evaluation of a given client’s riskiness. Thus, an efficient IC investment level might be considered a key factor that companies are expected to consider. The findings of this study provide valuable implications for users of financial statements, analysts, and policymakers with information regarding IC, risk determinants, and audit fees. Policymakers can improve market efficiency by implementing regulations that foster IC disclosure as a risk-determinant factor.

Keywords: intellectual capital; human capital; structural capital; relational capital; financial restatement; audit fees (search for similar items in EconPapers)
JEL-codes: C E F2 F3 G (search for similar items in EconPapers)
Date: 2023
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