Social Capital and Audit Fees

Document Type : Research Paper

Authors

1 Assistant Prof. of Accounting, Faculty of Management and Accounting, Farabi Campus of Tehran University, Qom, Iran

2 Ph.D. Student of Accounting, Farabi Campus of Tehran University, Qom, Iran

Abstract

Objective: The purpose of this research is to identify the effect of social capital on audit fees. As an emerging form of economic capital, social capital leads to mutual trust and beneficial partnerships in business environment and thereby driving economic behaviors toward collective well-being. In a capital market, audit fees are affected by client's risk and thus it can be an indicator of the effectiveness of the trust of social capital in the business environment. In this regard, the present study investigates the effect of the client's social capital on audit fees.
Methods: Social capital indicators in this study include cognitive (including religiosity, family values, collectivism), and structural variables (including relationships with other companies and relationships with the government). The research sample includes 119 Tehran Stock Exchange (TSE) firms during the period from 2009 to 2017, and a multi-variable regression is used for hypothesis testing on a panel data set.
Results: The results show a negative and significant effect of social capital due to religiosity, collectivism and relations with other companies on the audit fees. However, there are not any significant effect about the social capital of family values and governmental relationship.
Conclusion: Social capital by creation of the trust, tendency to cooperate and formation of collective actions for achieving social and economic synergies has led to economic behaviors toward collective goals and interests and makes the avoidance of opportunistic behaviors in business and so it significantly contributes to a reduction in audit fees.

Keywords

References

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Accounting and Auditing Review
Volume 25, Issue 2
2018
Pages 269-288

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