Investigating the Effects of Litigation Risk Factors on Audit Fee

Auditing profession faced many lawsuits and also the extent damage of these lawsuits during the last two decades. Adverse consequences of these lawsuits are very severe for audit society and in this position the foundation of it become weaken. Therefore this paper studies the lawsuits against Iranian auditors and it''s relationship with the audit fee. Thus, in this paper by studying literature of auditing, first we identified 11 effective factors on litigation risk of auditors and then according to the data of 100 firms listed in Teheran Stock Exchange, we studied their effects on audit fees for the time period 2009 to 2014. The results indicate that in Tehran Stock Exchange, among 11 factors, only three of them which are effectiveness of the client''s internal control system, the auditor''s independence and ownership concentration have significant effect on the audit fees. These results suggest that the independent auditors don’t pay much attention to the litigation risk and the audit fee is usually based on volume of audit effort and it is not be affected by the litigation risk premium.