Examining the Relationship of CEO Compensation, Duality of Managing Director, and Weakness of Internal Organizational Controls with Audit Fee

Abstract

This study aims to examine the effect of CEO compensation, duality of managing director, and quality of internal organizational controls on audit fee. Audit fee is the written fee in the related financial statements; CEO compensation is extracted from the decisions in the public meeting session. Duality of managing director is simultaneous attribution of chief or vice presidency of CEO to one person obtained from CEO reports. To measure internal controls´ quality, reference of the auditor in his report to the significant internal control weaknesses was the basis. Using systematic random sampling, 91 firms listed in Tehran Stock Exchange from 2013-2015 were selected. For hypothesis test, panel regression model and Hausman test were used to select from combined models, fixed and random effects. Results showed a positive and significant correlation between natural logarithm of CEO compensation and audit fee. There was no significant correlation between duality of managing director, weakness of internal controls, and audit fee.