Current Year Audit Opinion and Next Year Audit Fees: Does Family Ownership Matter?

The paper aims to investigate the association between current year audit opinion and the pricing of the next year audit mission and whether this relationship differs with different nature of ownership (family – non-family) in the Egyptian setting. Using a sample of 358 firm-year observations from the Egyptian Stock Exchange (EGX hereafter) over the period 2016-2019, ordinary least square (OLS) regression models are estimated to test the research hypotheses and conduct sensitivity and additional analyses. The author didn’t find significant association between current year audit opinion and next year audit fees. However, if the auditor issues a qualified audit opinion for a family firm, he will ask for a fee premium for the next year audit mission. Results are robust to alternative measures of next year audit fees and current year audit opinion. The paper uses the current year audit opinion as an input to the next yearaudit pricing decision. The paper responds to previous calls to investigate the relationship between audit fees and type of audit opinion and the impact of family ownership on audit fees. In addition, this study uses three alternative measures of next year audit fees and an alternative measure of current year audit opinion. Finally, this study adds evidence to the corporate governance literature in developing countries.