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Article
Publication date: 19 May 2020

Mahdi Salehi, Masoumeh BehrouziYekta and Hossein Rezaei Ranjbar

The purpose of this study is to determine whether the incremental difference between the actual level of cash from the optimal amount (excess and insufficient cash) to the…

Abstract

Purpose

The purpose of this study is to determine whether the incremental difference between the actual level of cash from the optimal amount (excess and insufficient cash) to the abnormal amount of cash (abnormal positive and negative changes in cash) leads to an increase in audit fees.

Design/methodology/approach

To investigate the main purpose of this study, first, the authors, respectively, estimate the optimal cash flow and the normal (optimal) changes in cash by Oler and Picconi (2014) and Bates, Kahle and Stulz (2009) models for each period. In this regard, financial information of 116 companies listed on the Tehran Stock Exchange is selected during the period 2011-2016.

Findings

The results of this investigation indicate that holding an excessive amount of cash than optimal size and audit fees are negatively associated. Moreover, it is documented that abnormal changes in cash flow and audit fees are not significantly associated.

Originality/value

The outcomes of the current study contribute to providing an accurate estimation to determine audit fees in emerging markets.

Details

Journal of Financial Reporting and Accounting, vol. 18 no. 2
Type: Research Article
ISSN: 1985-2517

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