| Summary: | Research in audit service market has grown significantly since the first study published in 1980. The surge of Mainland Chinese companies listing on Hong Kong Stock Exchange and the different characteristics associated with Chinese domestic and Hong Kong audit markets have inspired this work to determine the audit service pricing models of these companies.
In addition to traditional determinants, two tailored explanatory variables were included. Regression analysis was the main methodology in order to identify significant variables of six types of shares.
The results of regression strongly supported previous studies on the importance of auditee size in the course of pricing audit services by giving that log total assets was significant across all groups. Number of stock exchanges listed, which was one of the new variables, was found to be significant in three groups. More importantly, it proved that not only the number of stock exchanges but also the location of second listed market had an impact on audit fees charged. Surprising, neither of the balance sheet based ratios, which were proxies of auditee complexity, was successful in explaining audit fees in any group and only non-financial measures of complexity was found to be significant in a couple groups.
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