The Pricing of Audit Services: Evidence from Kuwait

Audit provider pricing has become a hot subject in global industry forums. In Kuwait, in particular, a significant amount of audit pricing research has been conducted, as well as a number of publications on the topic (Al-Harshani and Meshari 685). Much attention has been paid to the primary factors that affect the price of audit fees in the district. It is crucial for clients to understand external audit fee determinants and this will be critical as the customer needs to monitor certain deciding factors or negotiate the audit fees payable. The auditors in Kuwait can benefit from the knowledge of external review determinants in setting proper audit fees for its clients.
Literature Review
The governments of Kuwait and other private players in the audit fields have conducted studies on the leading influencers of external audit fees (Al-Harshani and Meshari 686). From as early as 1890, the studies have sought to explicitly identify the determining factors that crucially measure the determinants of external audit fees. Widespread studies have been done in different countries, but with a particular focus on Kuwait. The significant research has been done in the USA, UK, France Australia, New Zealand Canada, Singapore and Hong Kong. The model that has mainly been used in the study has sought to analyze the variables present in audit fees formulation which majorly include how big the client review is, the complexity of the audit work and the riskiness involved.
The size of the audit firm and its competencies in handling the client's audit work has been another significant determinant variable that is useful in enhancing the external audit fee charge (Al-Harshani and Meshari 685). The studies done using this variable were major to determine whether paying higher fees to large audit firms created more value to the enterprise or not. The studies have come up with different conclusions with some researchers agreeing to the fact that the large payment of money to big firms influences the general direction and outcome of the audit work.
The audit fee model has also been used by scholars in coming up with the major factors that lead to variations in audit fees. The research has shown the existence of a direct relationship between audit fees, the client size, and complexity of the audit work (Al-Harshani and Meshari 687). The audit client complexity model is another important instrument that enhances measurement of audit fees majorly based on how detailed the customer's review exercise is likely to become
Audit client risk model measures the total sum of the examination fee charge to be a component of the normal service charge plus expected risk of the audit exercise as a result of any errors in the audited books of accounts (Al-Harshani and Meshari 687). The level of the risk can, however, be adjusted by the audit firm when they increase the level of precision and accuracy in carrying out the audit work. The size of the audit firm is another important variable in determining the amount of audit fee charge. Studies have pointed out to the main reasons why big audit firms tend to charge more cash in delivering their services. The main reason is that big audit firms are believed to posses more quality in the audit work. Additionally, it could be argued that the big companies will expect more fees as a result of the level of litigation exposure. Lastly, the big audit firms are known to face less competition, and even by charging a higher price, they will still have clients due to their market share control.
Methodology
The study adopted two major approaches in undertaking the above study. The primary method used was the sampling method which included selecting six audit firms among the many in Kuwait and collecting data from them (Al-Harshani and Meshari 689). The survey collected accurate data which was related to the measurement of amount charge in external audit, the physical location cover of the audit client and the financial statement variables of the customer. Model specification is also an adopted methodology in undertaking the study which involved the development of a system or model that was useful in determining the level of audit fee charge.
Discussions
The preliminary results of the study that was aimed at finding the pricing of audit services led to the coming up of statistical data of the variables that were included in the regression model. The data is also tabulated to show the explanatory variables that are used in the regression model. The table presents a little correlation between the variables that are utilized in the study (Al-Harshani and Meshari 690). The empirical findings of the study adopted the use of multiple regression analysis in determining the factors influencing the level of external audit risk in Kuwait. The model was tabulated to include variables that measured the review size, client complexity, audit risk and measure of the scale of the audit firm.
Conclusion
The study was mainly focused on the relevance of customer size, complexity, riskiness, and audit firm size as critical review features in influencing the level of examination fee that is charged. The findings indicated that the client size positively influences the level of audit fee charge in Kuwait. Additionally, the results showed an inverse relation between the inspection fee charge and the degree of the fee charged for audit work. The outcome further identified that the number of location that an audit team visits does not have an impact on the level of audit fee that id charged.









Works cited
Al-Harshani, Meshari O. "The pricing of audit services: evidence from Kuwait." Managerial Auditing Journal 23.7 (2008): 685-696.














Article 2: Organizational-Professional Conflict and Cultural Differences Among Auditors in Emerging Markets: The Case of Jordan and Kuwait.
Introduction
The role played by auditors in enhancing organizational growth, and well-being is a fact that is undeniable. There, however, arise differences that may negatively influence the level of audit work and may be categorized into cultural differences of the conflicts that may occur internally in the organization (El-Rajabi and Mohamad 485). The expectations of the public on the audit function are that of professionalism and accuracy. The internal organizational management and staff also require the auditor to perform their duties as expected. It is therefore very evident when this expectation is not met; it is likely to raise a conflict. Such a conflict might, if not checked, greatly interfere with the independence of the auditor.
Literature Review
The initial studies on this topic, with particular considerations for Kuwait and Jordan, reveal that organization commitment is at the center of conflict prevention and avoidance (El-Rajabi and Mohamad 487). Organizational commitment under this context is widely considered to include the firm belief and the willingness to comply, follow and abide by the standards set by the organization, in particular by the auditors.
Organizational, professional conflict mainly arises as a result of a failure in personal and organizational commitment. One major reason asserts that there is a contradiction between the two concepts (El-Rajabi and Mohamad 487). The ideology further argues that the organizational commitment could deal a major blow on the level of independence of auditors as it would lead to an inevitable breach of audit activities. Organizational, the personal conflict will specifically arise when the auditor realizes that their goals and objectives will go against the needs of the organizational or management culture in the short run.
The research conducted an examination of chartered accountants in Canada, and the revelation was based on the primary assumption of the existence of a conflict between the autocratic nature of the organization and the audit function (El-Rajabi and Mohamad 488). The study, however, found a positive correlation between organizational culture and personal culture, an indicator that the two could still get to work together. Jordan, however, demonstrated a negative correlation between Organizational Culture and Personal culture in a study conducted by the accountants and auditors.
In examining the incompatibility of employees, it was noted that the very core reason for an enterprise is to promote harmony and unity among its workers. When auditors come together in an organization, they feel a sense of protection and confidence (El-Rajabi and Mohamad 488). The firms give them the courage to withstand organizational pressures that come for their organizations. By positively accepting the challenges, the levels of conflict is majorly avoided or reduced. When the auditors have more experience working for the organization, they will have more knowledge about what they do and adapt to the working environment efficiently, thereby increasing their personal and organizational control. In the process of doing audit work, the staff gains professional experience and education. The training specifically increases the professional understanding of the organizational tasks, and this too is beneficial in reducing the level of conflicts. The nationality of the auditor influences the cultural behavior and the overall outcome of the audit work. Culture mainly affects attitude, behavior and the general approach of the wok, and it is that which influences the level of control of the staff.
Methodology
The study adopted survey by use of questionnaires as one of the methods of conducting the study in Kuwait and Jordan (El-Rajabi and Mohamad 490). In Jordan, a total of 192 respondents filled questionnaires while 200 questionnaires were used in Kuwait. 68% of those who filled the questionnaires in Jordan had an adequate undergraduate education while in Kuwait, this number represented 83%. 11% of respondents in Jordan had postgraduate studies while 25% from Kuwait had professional certificates. The study also adopted the use of questionnaires which composed of a collection of demographic data and a form to be filled by the respondents which provide multiple choices. Additionally, the study adopted
Discussion
The correlation analysis done revealed between organizational culture and personal control. The correlation showed a conflict in the professional and vocational aspect of the organization (El-Rajabi and Mohamad 491). Regression analysis, on the other hand, revealed that the coefficient of demographic variables such as the education of the respondents, their culture, and experience had a direct effect personal control and organizational control.
Conclusion
Jordan and Kuwait share so much regarding the cultural differences that are witnessed in these countries. The similarities can be traced back to the common cultural similarities by way of religion, culture, language and nationality. There is, however, a big economic difference between Kuwait having surplus money as a result of oil sales while Jordan is a relatively developing country. All these factors affect the audit environment and bring about a notable difference and a continuous conflict.
Works cited
El-Rajabi, Mohamad TA. "Organizational-professional conflict and cultural differences among auditors in emerging markets: The case of Jordan and Kuwait." Managerial Auditing Journal 22.5 (2007): 485-502.













Article 3: Antecedents and Consequences of Burnout in Accounting: Beyond the Role of Stress Model.
Introduction
Burnout of employees is a fact that is well known and applies to many different business aspects. This paper is concerned with the relationship that exists between burnout and significant human factors such as behavior and attitude (Fogarty and Timothy J., et al 31). The research is specific on the burnout for accountants and the resultant effects that it has on the general organizational performance. The research also focuses on the level of drawing a line in the functions of the staff and the level of stress that can so much affect the organizational performance. Burnout research shows that the study is relevant for the accounting personnel.
Literature Review
Burnout research has in the past widely been conducted to make an analysis of the facts about how it directly affects the level of work output. Burnout can in most cases cause emotional exhaustion and pressure to a person (Fogarty and Timothy J., et al 33). The Occupational Health and Applied Biology Literature reveals that fatigue causes visible psychological effects that can make a person less productive. The role of stressors in conceptual distinction is one that is much evident as effects of burnout. Cumulatively, the role of stressors in causing exhaustion can be high. Role stress is one aspect that has been proven to be serious when present and is always productive up to just a certain level. Beyond the maximum level of role stress, the critical tasks that a person performs in an organization always become dysfunctional.
Burnout can also be studied using the hypothesis model as a primary mediating variable. There are conceptual and empirical arguments pining to the role of burnout and these can be summarized with one of them being the adverse effects of job outcomes as a result of exhaustion. It has also been proven that when role stressors are at intermediate level, they can cause positive and good results on the levels of job outcomes. Role stressors also have a direct effect on burnout tendencies (Fogarty and Timothy J., et al 37). The roles have specifically been divided into three parts, with each part being uniquely responsible for the consequences of the stressor. When the rate of, conflict, ambiguity, overload, and burnout are high within an individual, there will be most likely burnout symptoms for such a person is most likely to be so high. Job burnout has very direct effects on the level of an employment outcome, and these include the personal effects such as psychological breakdown to the job related and the effect on the degree of attachment to the particular organization. Job satisfaction is, therefore, a vital factor when controlled burnout is enhanced.
In most cases, the accountants who are always caught in the burnout have a typical behavior of slowly withdrawing from offering their full participation in the organizational affairs (Fogarty and Timothy J., et al 40). The acts will make the accountants have a very different view of the organization and even develop a weak relationship with the core workers. The persistence of burnout in a person will eventually result in the person resigning from theory positions and seeking for better opportunities in other organizations. Stressors also have effects on job outcomes as the people involved will have a little output of their real potential.
Methodology
Measurement of burnout tendencies was done using the items taken from the Maslach Burnout Inventory after a swift modification to fit accounting measurements. The study further adopted the short version of survey instruments such as the need arose of measuring a group of highly stressed up respondents. A multidimensional scale which was developed by Churchill was also used to improve the level of job satisfaction (Fogarty and Timothy J., et al 43). The performance of the research was measured using a Six-Item scale drawn which was designed by Dubinsky Matson. The scale was necessary for substantially minimizing the self-reported results in the area of performance measurement of the study. The study further used questionnaires whereby a total of 188 respondents participated.
Discussion
The burnout constructs in relevant in offering an insight and a deeper understanding of stress literature. The measurements of the coefficients of the study are a clear sign that burnout tendencies have consistent, dysfunctional and significant influences on job outcomes (Fogarty and Timothy J., et al 44). Burnout can also be said to appear as a conclusive mediating variable due to its ability to act beyond the stress levels. The impacts of role stressors which are closely linked to burnouts significantly affect the standard of job satisfaction. When one needs to influence the degree of role stressors on job satisfaction, there will be a result merge.
Conclusion
Major studies in behavioral accounting have been critical in dealing with the role stress, especially in accounting positions. Major organizations have however ignored the burnout factor despite the effects that it creates. The study has sought to explain the significant roles that burnout has on the accounting profession and the accounting firms. Burnout has been identified as an important aspect of stress control through the demonstrations of stress models. Apart from having an academic value, the concept of burnout has been adopted by many accountants in their employment.
Works cited
Fogarty, Timothy J., et al. "Antecedents and consequences of burnout in accounting: Beyond the role stress model." Behavioral Research in Accounting 12 (2000): 31-67