The Role of Litigation Risk, Information Asymmetry and Economic Uncertainty in Explaining Audit Fee

Information asymmetry and economic uncertainty are features of the capital market in today's complex business environment, which increase audit risk and litigation risk, and can be effective in explaining audit fees. The purpose of this research is to investigate the role of legal claims risk, information asymmetry and economic uncertainty in explaining audit fees. The time domain of the research is the period from 2013 to 2021 and the research sample includes 120 companies listed on the Tehran Stock Exchange. Research findings, based on analysis using multivariable regression models on combined data, show that among the macroeconomic variables investigated (including economic growth rate, inflation rate, exchange rate, and interest rate), both economic growth rate and inflation rate have a direct and significant relationship with the audit fee. Additionally, there is a direct and significant relationship between the risk of lawsuits and information asymmetry with the audit fee. The results indicate that the risk of lawsuits, economic uncertainty and information asymmetry play an effective role in explaining auditors' fees.