1. LETTER OF TRANSMITTAL
August 22, 2013
Mohammad Moniruzzaman, ACA
Assistant Professor
Department of Accounting & Information Systems
University of Dhaka
Subject: Submission of Internship Report.
Dear Sir,
With due respect, it is my great pleasure to submit the internship Report. The report
entitled “Determinants of Audit fee: Empirical Study of 50 listed companies in
Bangladesh” which is a partial requirement for the completion of MBA degree. I have
left no stone unturned to collect data about audit fee and other variable of financial
statement that are significant to determine audit fee. I have also collected data about the
practice of the audit firm of what they follow to determine the audit fee of their listed
client to provide assurance service. I have furnished all the things what I have learnt
during the internship program at Rahman Rahman Huq (RRH), Chartered Accountants, 9
Mohakhali C/A, Dhaka-1212.I hope that this report will meet the standards of your
judgments. I have tried my best to make this report interesting, informative and better
one. Any mistake or shortcoming in this report would be apologetically considered as my
fault.
I, therefore, pray and hope that you would kindly accept my report and oblige thereby.
Sincerely yours
Md Ibne Nayeem Hasan
MBA, 14th Batch, Sec: A, ID # 460
BBA, 14th Batch, Sec: B, ID # 14095
Department of Accounting & Information Systems
University of Dhaka
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2. PREFACE
Today we are very much involved in the business era. Only book-based knowledge is not
enough to cope with real business environment. Effective combination of theoretical
knowledge with practical experience is the key to success. Considering this, internship
program is included in the degree Master of Business Administration( MBA) from the
Department of Accounting & Information Systems of University of Dhaka.
I have selected the audit firm as my field to conduct my internship program which runs
for two months only. I am an articled student of KPMG Rahman Rahman Huq (RRH)
also. I tried my best to collect relevant and significant data as much as possible and
prepare the report with my best effort. I regret for any undue mistakes in this report. If the
report do little support to any student, teacher, researcher or analyst, I may consider my
effort does not go in vain.
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3. STUDENT’S DECLARATION
I, Md. Ibne Nayeem Hasan, a student of MBA 14th Batch, Department of Accounting &
Information Systems, University of Dhaka, do hereby declare that the internship report
titled “Determinants of Audit fee: Empirical Study of 50 listed companies in
Bangladesh.” is the outcome of three months practical work on the topic mentioned
above under the supervision of Mohammad Moniruzzaman, ACA, Assistant Professor,
Department of Accounting & Information Systems, University of Dhaka, Bangladesh.
I also declare that this report is an original work and no part of this report has been copied
from elsewhere. In addition I would also like to mention that this report has not been
published or submitted for being published or submitted for awarding any degree,
diploma or recognition.
Sincerely Yours
Md. Ibne Nayeem Hasan
MBA, 14th Batch, Sec: A, ID # 460
BBA, 14th Batch, Sec: B, ID# 14095
Department of Accounting & Information Systems
University of Dhaka
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4. LETTER OF ACCEPTANCE
This is to certify that Md. Ibne Nayeem Hasan, MBA 14th batch Sec :A, ID No: 460,
Department of Accounting & Information Systems, has completed his internship report
titled on “Determinants of Audit fee: Empirical Study of 50 listed companies in
Bangladesh” under my supervision as a part of partial requirement for obtaining Master
of Business Administration (MBA) degree in Accounting & Information Systems. This
report can be accepted for evaluation.
Mohammad Moniruzzaman, ACA
Assistant Professor
Department of Accounting & Information Systems
University of Dhaka
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5. ACKNOWLEDGEMENT
In every scene of one's life there are some persons who make other's life precious. They
provide inspiration support, and maximum effort to help in different way to make other's
smile at the end of an event. In same manner to completion of this internship report, I
cannot deserve all the praise. There were lot of people who helped me by providing
valuable information, guidance and their valuable time.
At first, I would like to express my gratitude to almighty Allah for enabling me the
strength and opportunity to complete the report within the schedule time successfully. It
was a great pleasure to prepare internship report titled “Determinants of Audit fee:
Empirical Study of 50 listed companies in Bangladesh.” I have benefited from the
cooperation of many people during the preparation of the report. First of all, I would like
to tender my gratitude to my esteemed Sir Mohammad Moniruzzaman, ACA for his
sincere guidance about how to prepare the report. Without his guidance, it would very
difficult for me to complete the report.
I express my deep gratefulness to Ali Ashfaq FCA, partner, Rahman Rahman Huq;
Yakub Ali ACA, Rahman Rahman Huq, Assistant Manager, Rahman Rahman Huq for
selecting me to the statutory audit client named ECPV Chittagong Ltd and granting me
the access of different correspondence file related to audit and advisory services.
But there are also so many people who helped me during this period by their valuable
speech, time, hospitality & co-operation. I like to mention their name also. I like to thank
Md Fuad Hasan (Supervisor) and Abul Hasnat Md. Lutful Abedin (Audit Assistant)
Rahman Rahman Huq. The Internship program cannot be successful without their proper
guidance and kind co-operation.
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6. EXECUTIVE SUMMARY
This study investigates the factors affecting the level of audit fees paid by companies to
their auditors. Firstly, all the likely factors thought to be affecting the level of audit fees
were identified through a literature survey. These factors were classified into three groups
i.e., size, complexity, and others. The relative importance of these factors was determined
empirically and statistically. The empirical study was undertaken by mailing two
questionnaires to samples of 100 companies, and 100 audit firms. Preliminary interviews
were carried out in order to identify if the most important factors collected through the
literature should be considered suitable for final conclusion. The questionnaires were not
used to collect data or to quantify the subjective factors. They were used to assess the
degree to which the factors previously identified were important determinants of the audit
fee, and whether other determinants should also be considered. The data for the statistical
analysis was obtained from published data i.e., Data Stream, Companies' Annual
Reports,. In carrying out the statistical analysis, Multiple Regression arid Correlation
Techniques were used to assess the magnitude of the association between the size and
complexity factors and audit fees. An audit fee regression model was developed which
explains of the variation in audit fees of the 50 listed companies in Bangladesh. on the
basis of their size and complexity. The results of both the empirical study, and the
statistical analysis revealed that the company size (total assets, market capitalization,
capital expenditure, operating cash flow), and its complexity (sponsorship shareholding)
are the major objective determinants of audit fees. The empirical study also revealed that
the quality of the company's internal control system, competition in the audit market, and
the risk involved in the audit work are the major subjective determinants of audit fees. In
addition, the statistical analysis revealed that the factors total long term debt, sponsorship
shareholdings , and total employment costs are the most significant predictors of audit
fees. Chapter 1 describes the induction and other information of the audit fee. Chapter 2
describes data analysis using different statistical tools and chapter 3 describes
recommendation and conclusion with references.
vi

7. EXECUTIVE SUMMARY
This study investigates the factors affecting the level of audit fees paid by companies to
their auditors. Firstly, all the likely factors thought to be affecting the level of audit fees
were identified through a literature survey. These factors were classified into three groups
i.e., size, complexity, and others. The relative importance of these factors was determined
empirically and statistically. The empirical study was undertaken by mailing two
questionnaires to samples of 100 companies, and 100 audit firms. Preliminary interviews
were carried out in order to identify if the most important factors collected through the
literature should be considered suitable for final conclusion. The questionnaires were not
used to collect data or to quantify the subjective factors. They were used to assess the
degree to which the factors previously identified were important determinants of the audit
fee, and whether other determinants should also be considered. The data for the statistical
analysis was obtained from published data i.e., Data Stream, Companies' Annual
Reports,. In carrying out the statistical analysis, Multiple Regression arid Correlation
Techniques were used to assess the magnitude of the association between the size and
complexity factors and audit fees. An audit fee regression model was developed which
explains of the variation in audit fees of the 50 listed companies in Bangladesh. on the
basis of their size and complexity. The results of both the empirical study, and the
statistical analysis revealed that the company size (total assets, market capitalization,
capital expenditure, operating cash flow), and its complexity (sponsorship shareholding)
are the major objective determinants of audit fees. The empirical study also revealed that
the quality of the company's internal control system, competition in the audit market, and
the risk involved in the audit work are the major subjective determinants of audit fees. In
addition, the statistical analysis revealed that the factors total long term debt, sponsorship
shareholdings , and total employment costs are the most significant predictors of audit
fees. Chapter 1 describes the induction and other information of the audit fee. Chapter 2
describes data analysis using different statistical tools and chapter 3 describes
recommendation and conclusion with references.
vi