The Impact of Managerial Ability on Audit Fees in Listed Companies in Tehran Stock Exchange

An essential process in institutionalizing democracy is accountability. It seems one of the main ingredients of economic accountability is auditing. In spite of audits development and it has extended the application from top to bottom of governing level in each country, the service determinants of fees are still unknown. The results of recent studies show that Managerial Ability is one of the determinants of audit fees. In accounting literature, managerial ability is one of the dimensions of human capital, which classified as an intangible asset. Some researchers define managerial ability as management efficiency compared to competitors to change the company`s resources into revenue. This article aims to study the effect of managerial ability on audit fees. The sample size consisted of 105 companies listed on the Tehran Stock Exchange (TSE) from 2007 to 2014. managerial ability is a part of a firm`s performance, which is not affected by the firm's natural factors. In order to calculate and analyze the managerial ability, the model proposed by Demerjian et al. (2012, 2013) was employed. Hypothesis testing was performed using multivariate linear regression statistical methods and Data Envelopment Analysis (DEA). The results show that managerial ability has a negative and significant effect on audit fees. In other words, more able managers pay less audit fees. The results of the hypothesis testing indicate that the Auditor Size lead to weakening the relation between managerial ability and audit fees. According to additional review, financial leverage, the firm’s size and Return on Assets are also effective at the audit fees.