Pricing Initial Audit Engagements: Empirical Evidence from Kuwait

Abstract

The practice of audit fee cutting for initial years (e.g., low-balling) has been an interesting research topic in audit literature for more than twenty years. Yet, empirical evidence about this important issue has typically come from English-speaking and well-developed countries, with little research, if any, examining this issue in the other parts of the world. The objective of the current study is to add to the international audit literature by providing evidence about this issue from the Kuwaiti audit market. In particular, the study aims at examining whether audit firms in Kuwait "discount" their audit fees for initial audit years. The results provide evidence of a fee "discounting" practice by audit firms during initial audit years in the Kuwaiti audit market.