What Drives Audit Fees? The Role of Risk Management Committees and Firm Characteristics

Abstract

This quantitative study aims to examine the influence of the risk management committee, firm size, and corporate leverage on audit fees in banking and insurance sector companies listed on the Indonesia Stock Exchange (IDX) during the 2022–2024 period. This study is motivated by the importance of understanding the determinants of audit fees in highly regulated industries, where corporate governance mechanisms, financial complexity, and risk characteristics may affect audit pricing decisions. The sample was selected using a purposive sampling technique, resulting in 40 banking and insurance companies that met the research criteria. Secondary data were collected from the companies’ annual reports and audited financial statements for the 2022–2024 period and analyzed using panel data regression. The findings indicate that firm size has a positive and significant effect on audit fees, suggesting that larger companies require greater audit effort due to their more complex operations, higher transaction volumes, and broader reporting responsibilities. In contrast, the risk management committee does not have a significant effect on audit fees, indicating that the existence of this governance mechanism alone does not substantially influence auditors’ pricing decisions. Meanwhile, corporate leverage has a negative and significant effect on audit fees, implying that differences in capital structure may influence auditors’ assessment of audit engagement and pricing. Overall, the results demonstrate that company-specific characteristics, particularly firm size and leverage, play an important role in determining audit fees in Indonesia’s banking and insurance sectors. These findings contribute to the literature on audit pricing and corporate governance while providing practical implications for company management, auditors, investors, and regulators in understanding the factors that influence audit fee determination and improving governance practices within the financial services industry.