Product Market Competition and Audit Fees: Role of Corporate Governance

The aim of this study was to investigate the relationship between product market competition and the audit fees with regard to the role of corporate governance. Using TOPSIS, a ranking index of companies was made based on corporate governance. The index included six factors: board of director size, board independence, CEO duality tasks, institutional ownership, ownership concentration and independent auditors. The test research hypotheses, multivariate regression analysis and panel data approach with fixed effects is used. Sample includes firms listed in Tehran Stock Exchange (TSE) and Iran Fara Bourse (IFB) market during 2009 to 2014. Findings indicate that there is a positive relationship between product market competition and audit fees and corporate governance mechanisms have the reverse effect on this relation and reduce the strength of this relationship. This means that in competitive environment, business risk is high and so, audit risk and audit fee are increased. However, if client has appropriate corporate governance mechanisms, increase in the audit fee is less.