Related-Party Transactions and Audit Fees

Fortuna Oktavia Perwita, Iman Harymawan


This research aims to analyze the association between the related-party transactions and audit fees. This study used 781 observations listed on the Indonesia Stock Exchange from 2010 to 2017. The analysis technique used in this research was the Ordinary Least Square Regression analysis model processed with STATA 14.0 software.  This study found that related-party transactions are positively and significantly related to audit fees. The result indicated that the related-party transactions increase audit fees paid by companies. It also investigated the moderating effect of industry specialty auditors. This indicated that auditor specialization strengthened the relationship between the related-party transactions and audit fees. The market share proxy was used to measure industry specialization. However, this proxy still has disadvantages as it can generate different market shares. This study found that related-party transactions increased audit fees. The results of this study can be used as consideration in making decisions for related parties.


Related-party transactions, audit fees, auditor specialization

Full Text:



Aharony, J., Wang, J., & Yuan, H. (2010). Tunneling as an incentive for earnings management during the IPO process in China. Journal of Accounting and Public Policy.

Al-Dhamari, R. A., Al-Gamrh, B., Ku Ismail, K. N. I., & Haji Ismail, S. S. (2018). Related party transactions and audit fees: the role of the internal audit function. Journal of Management and Governance.

Bae, G. S., Choi, S. U., & Rho, J. H. (2016). Audit Hours and Unit Audit Price of Industry Specialist Auditors: Evidence from Korea. Contemporary Accounting Research.

Beasley, M. S., Carcello, J. V., Hermanson, D. R., & Lapides, P. D. (2000). Fraudulent financial reporting: Consideration of industry traits and corporate governance mechanisms. Accounting Horizons.

Bona-Sánchez, C., Fernández-Senra, C. L., & Pérez-Alemán, J. (2017). Related-party transactions, dominant owners and firm value. BRQ Business Research Quarterly.

Bryan, D. B., & Mason, T. W. (2017). Executive tournament incentives and audit fees. Advances in Accounting.

Chen, Y., Ge, R., & Zolotoy, L. (2017). Do corporate pension plans affect audit pricing? Journal of Contemporary Accounting and Economics.

DeBoskey, D. G., & Jiang, W. (2012). Earnings management and auditor specialization in the post-sox era: An examination of the banking industry. Journal of Banking and Finance.

El-Helaly, M. (2018). Related-party transactions: a review of the regulation, governance and auditing literature. Managerial Auditing Journal.

Fleming, D., Hee, K., & Romanus, R. N. (2014). Auditor industry specialization and audit fees surrounding Section 404 implementation. Review of Accounting and Finance.

Fuentes, C. De, & Sierra, E. (2015). Industry specialization and audit fees : a meta-analytic approach Especialización industrial y honorarios de auditoría : Un estudio meta-analítico. Academia Revista Latinoamericana de Administración.

Gallery, G., Gallery, N., & Supranowicz, M. (2008). Cash-based related party transactions in new economy firms. Accounting Research Journal.

Gordon, E. A., Henry, E., Louwers, T. J., & Reed, B. J. (2007). Auditing related party transactions: A literature overview and research synthesis. Accounting Horizons.

Habib, A., & Bhuiyan, M. B. U. (2011). Audit firm industry specialization and the audit report lag. Journal of International Accounting, Auditing and Taxation.

Habib, A., Jiang, H., & Zhou, D. (2015). Related-party transactions and audit fees: Evidence from China. Journal of International Accounting Research.

Hong, P. K., & Hwang, S. (2018). Fair value disclosure of pension plan assets and audit fees. Advances in Accounting.

Jiang, W., & Son, M. (2015). Do audit fees reflect risk premiums for control risk? Journal of Accounting, Auditing and Finance.

Johnson, S. H., La Porta, R., Lopez de Silanes, F., & Shleifer, A. (2005). Tunnelling. SSRN Electronic Journal.

Kend, M. (2008). Client industry audit expertise: towards a better understanding. Pacific Accounting Review.

Kohlbeck, M., & Mayhew, B. W. (2017). Are Related Party Transactions Red Flags? Contemporary Accounting Research.

McMeeking, K. P., Peasnell, K. V., & Pope, P. F. (2006). The determinants of the UK Big Firm premium. Accounting and Business Research.

Nagy, A. L. (2014). Audit partner specialization and audit fees. Managerial Auditing Journal.

Rusmin, R., & Evans, J. (2017). Audit quality and audit report lag: Case of Indonesian listed companies. Asian Review of Accounting.

Ryngaert, M., & Thomas, S. (2012). Not All Related Party Transactions (RPTs) Are the Same: Ex Ante Versus Ex Post RPTs. Journal of Accounting Research.

Salehi, M., Tarighi, H., & Safdari, S. (2018). The relation between corporate governance mechanisms, executive compensation and audit fees: Evidence from Iran. Management Research Review.

Scott, W. D., & Gist, W. E. (2013). Forced auditor change, industry specialization and audit fees. Managerial Auditing Journal.

Simunic, D. A. (1980). The Pricing of Audit Services: Theory and Evidence. Journal of Accounting Research.

Solomon, I., Shields, M. D., & Whittington, O. R. (1999). What Do Industry-Specialist Auditors Know? Journal of Accounting Research.

Waresul Karim, A. K. M., & Moizer, P. (1996). Determinants of audit fees in Bangladesh. International Journal of Accounting.



Copyright (c) 2021 Fortuna Oktavia Perwita, Iman Harymawan

Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

This Journal Indexed by:



Creative Commons License
This work is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.