Have a personal or library account? Click to login
Determinants of External Audit Fees: Empirical Evidence from the Audit Market in Kosovo Cover

Determinants of External Audit Fees: Empirical Evidence from the Audit Market in Kosovo

Open Access
|Oct 2025

Figures & Tables

Figure 1.

Differences in Audit Fees Based on Client Complexity
Differences in Audit Fees Based on Client Complexity

Figure 2.

Differences in Audit Fees Based on Client RiskSource: authors' calculations (STATA).
Differences in Audit Fees Based on Client RiskSource: authors' calculations (STATA).

Figure 3.

Differences in Audit Fees Based on Audit Firm Size
Differences in Audit Fees Based on Audit Firm Size

Figure 4.

Differences in Audit Fees Based on Industry Specialization
Differences in Audit Fees Based on Industry Specialization

Correlation Analysis Results

Variables (1)(2)(3)(4)(5)(6)
Audit Fee (AF) (1)Cor10.907**0.181**0.0430.0890.062
Sig0.0000.0020.4580.1260.287
N300300300300300300
Client Size (CS) (2)Cor0.907**10.0670.037−0.0840.052
Sig0.0000.2500.5290.1480.369
N300300300300300300
Client Complexity (CC) (3)Cor0.181**0.0671−0.035−0.0430.012
Sig0.0020.2500.5450.4600.842
N300300300300300300
Client Risk (CR) (4)Cor0.0430.037−0.03510.138*−0.079
Sig0.4580.5290.5450.0170.171
N300300300300300300
Audit Firm Size (‘BIG10’) (5)Cor0.089−0.084−0.0430.138*1−0.049
Sig0.1260.1480.4600.0170.398
N300300300300300300
Corporate Governance of Audited Firms (CGAF) (6)Cor0.0620.0520.012−0.079−0.0491
Sig0.2870.3690.8420.1710.398
N300300300300300300

Results of the Regression Analysis

Audit feeCoef.St. Err.t-valuep-value[95% ConfInterval]Sig
CS0.0010.0142.790.0000.010.03***
CC151.7125.046.060.000102.4200.9***
CR−6.9623.64−0.290.768−53.439.5
‘BIG10’481.6660.617.950.000362.3600.9***
CGAF45.2451.880.870.384−56.8147.3
PAC215.21214.481.000.316−206.9637.3
TEN26.0511.812.200.0282.749.3**
IS45.8124.311.880.061−2.093.6*
‘BIG10’ × POST2019920.3485.122.590.01153.4387.3***
Constant−77.43198.58−0.390.697−468.2313.4
Mean dependent var3632.000SD dependent var1411.080
R-squared0.879Number of obs300
F-test243.045Prob > F0.000
Akaike crit. (AIC)4607.977Bayesian crit. (BIC)4641.311

Variable definitions, theoretical link and expected sign

ConstructOperational measureTheoretical linkExpected sign
Audit Fee (LnAF)Natural log of statutory audit fee (€)Dependent variable
Client Size (CS)Ln (Total Assets)RBV+
Client Complexity (CC)Business segments, geographical divisions, or interactions between business units.RBV+
Client Risk (CR)3-point ordinal score (1 = Low, 2 = Medium, 3 = High) assigned annually by the engagement partner; criteria: distress, complexity, audit history.Agency+
Audit firm Size (‘BIG10’)1 = member of Big 10 network, else 0Signalling+
Corporate Governance (CGAF)0–10 composite: Board Independence (0–4) + Audit-Committee Expertise (0–3) + Gender Diversity (0–3); recalculated each fiscal year.Institutional voids+/−
POST20191 for FY 2020–2022, else 0Regulatory shock±
‘BIG10’ × POST2019Interaction termH6+
ControlsProfitability (ROA), Auditor Tenure, Industry Specialisation dummies, Year FE.var

Differences in Audit Fees Based on Audit Firm Size

Audit Firm Size (‘BIG10’)Posterior95% Confidence Interval
ModeMeanVarianceLower BoundUpper Bound
Audit Firm Size (‘BIG10’) = 03,512.13,512.112,7923,290.33,734
Audit Firm Size (‘BIG10’) = 13,761.83,761.813,8583,530.93,992.6
Audit Fee (AF)Sum of SquaresdfMean SquareFSig.
Between Groups4,666,010.414,666,010.42.350.126
Within Groups590,686,789.52981,982,170.4
Total595,352,800299

Differences in Audit Fees Based on Client Risk

Client Risk (CR)Posterior95% Confidence Interval
ModeMeanVarianceLower BoundUpper Bound
Client Risk (CR) = 13,695.53,695.544404.23,282.24,108.8
Client Risk (CR) = 23,407.03,407.028143.53,078.53,736.8
Client Risk (CR) = 33,571.83,571.831221.73,225.33,918.4
Client Risk (CR) = 43,893.73,893.724977.33,583.74,203.7
Client Risk (CR) = 53,532.53,532.549954.73,094.13,970.8
Audit FeesSum of SquaresdfMean SquareFSig.
Between Groups9,883,210.042,470,802.51.245.292
Within Groups585,469,589.92951,984,642.6
Total595,352,800.0299

Sensitivity checks

ModelDep. Var.Sample‘BIG10’ Coef.CS Coef.Adj. R2
(1) Baseline OLS HC3LnAFFull 300481.7 ***0.00100 ***0.882
(2) 2SLS (instrumented ‘BIG10’)LnAFFull 300512.7 ***0.00102 ***0.871
(3) Alt. dep. var. (Fee/Assets)Fee/TAFull 3000.034 ***0.00080 ***0.425
(4) Excluding ‘BIG10’ clientsLnAFn = 2520.00090 ***0.734
(5) Year FE + CPI controlLnAFFull 300479.6 ***0.00101 ***0.889
(6) Public firms onlyLnAFn = 15620.3 **0.00070 *0.793

Theory to Hypothesis development

TheoryKey mechanism in KosovoLinked hypothesis (section 2.4)Regression variable(s)
AgencyLow litigation → muted risk pricingH3CR
SignallingBrand value under opacityH4‘BIG10’
Regulation amplifies brandH6‘BIG10’ × POST2019
RBVCapability demands of size/complexityH1, H2CS, CC
Institutional voidsWeak enforcement blunts the CG effectH5CGAF

Differences in Audit Fees Based on Client Complexity

Client Complexity (CC)Posterior95% Credible Interval
ModeMeanVarianceLower BoundUpper Bound
Client Complexity (CC) = 13,439.43439.451,062.82,996.23,882.6
Client Complexity (CC) = 23,429.83429.822,303.33,136.93,722.8
Client Complexity (CC) = 33,522.73522.724,561.83,215.33,830.1
Client Complexity (CC) = 43,757.13757.130,799.83,412.94,101.3
Client Complexity (CC) = 54,409.044,09.058,799.63,933.44,884.6
Audit feesSum of SquaresdfMean SquareFSig.
Between Groups26,819,165.846,704,791.43.479.009
Within Groups568,533,634.12951,927,232.6
Total595,352,800.0299

Testing for Multicollinearity

VariablesVIF1/VIF
‘BIG10’1.033.968
CR1.03.97
CS1.02.981
CGAF1.015.985
TEN1.014.986
CC1.013.987
IS1.01.99
PAC1.01.991
Mean VIF1.018

Testing for Heteroskedasticity

Breusch-Pagan / Cook-Weisberg test for heteroskedasticityValue
chi2(1)58.28
Prob > chi20.6717

Split-sample by ownership type

SampleN‘BIG10’ Coef.p-ValueCS Coef.p-ValueAdj. R2
Private companies285467.8 ***00.00102 ***00.876
Public companies15620.3 **0.0140.00070 *0.0830.793

The results of the Cronbach's Alpha test

N%
CasesValid300100.0
Excluded00.0
Total300100.0
Reliability Statistics (Test)
Cronbach's AlphaNumber of Items
0.80210

Summary of Hypothesis Testing

HHypothesisCoefficientP-ValueTesting
1A significant positive relationship exists between the size of the audited entity and audit fees in Kosovo.β =0.001P=0.000Accepted
2A significant positive relationship exists between the complexity of the audited entity and audit fees in Kosovo.β=151.71P=0.000Accepted
3There is a significant positive relationship between the risk of the audited entity and audit fees in Kosovo.β=−6.96P=0.768Rejected
4There is a significant positive relationship between large audit firms (‘Big-10’) and higher audit fees in Kosovo.β=481.66P=0.000Accepted
5Strong corporate governance is associated with lower audit fees in Kosovo.β=45.24P=0.384Rejected
6Regulatory moderation hypothesis: the positive association between ‘BIG10’ engagement and audit fees is stronger after the 2019 enactment of Law No. 06/L 032 than before (tested via an interaction term ‘BIG10’ × POST2019).β=920.34P=0.011Accepted

Descriptive Statistics

VariablesNMinimumMaximumMeanStd. Deviation (SD)
Audited companies (sample)3001300150.586.7
Audit Fee30090064036321411
Client Size (CS)300548,769.44,998,729.52,798,741.7922,337.2
Client Complexity (CC)300152.81.19
Client Risk (CR)3001531.2
Audit Firm Size (‘BIG10’)300010.480.50
Corporate Governance of Audited Firms (CGAF)30012.91.90.57
Profitability of the Audited Company (PAC)3001.1%49.92%25.69%13.98%
Auditor Tenure (TEN)3001.09.04.92.54
Industry Specialisation (IS)300152.91.2

Distribution of the Data

VariableObsWVzProb>z
AF3000.9588.8455.117.654
CS3000.94411.9975.832.860
CC3000.9951.0130.031.488
CR3000.9931.4110.808.209
‘BIG10’30010.104−5.308.999
CGAF3000.9549.7785.352.860
PAC3000.9559.5335.293.964
TEN3000.9853.1962.728.203
IS3000.9970.68−0.906.817

Differences in Audit Fees Based on Industry Specialisation

Industry Specialisation (IS)Posterior95% Confidence Interval
ModeMeanVarianceLower BoundUpper Bound
Industry Specialisation (IS) = 13,560.93,560.949,250.03,125.73,996.2
Industry Specialisation (IS) = 23,644.23,644.228,846.43,311.13,977.4
Industry Specialisation (IS) = 33,540.53,540.525,560.13,226.93,854.5
Industry Specialisation (IS) = 43,619.13,619.127,661.03,292.93,945.3
Industry Specialisation (IS) = 53,908.13908.154,574.43,449.94,366.3
Audit FeesSum of SquaresdfMean SquareFSig.
Between Groups3,711,4264927,856.60.4630.763
Within Groups5,916,4132952,005,563.9
Total5,953,528299
DOI: https://doi.org/10.2478/ceej-2025-0014 | Journal eISSN: 2543-6821 | Journal ISSN: 2544-9001
Language: English
Page range: 219 - 242
Submitted on: Mar 17, 2025
Accepted on: Jul 2, 2025
Published on: Oct 2, 2025
Published by: Sciendo
In partnership with: Paradigm Publishing Services
Publication frequency: 1 times per year

© 2025 Vese Qehaja Keka, Arber Hoti, published by Sciendo
This work is licensed under the Creative Commons Attribution 4.0 License.