Abstract

The aim of this paper is to investigate the impact of agency cost of free cash flow hypothesis on audit fees. In this paper we employ three variables such as level of debt, growth opportunities ratio and cash payment that were used as variables affecting agency costs. For this purpose, data from companies listed in Tehran Stock Exchange (TSE) for the period 2006 to 2009 with pooled data regression were used. The results generally confirm the existence of significant relationship between the agency costs of free cash flows and the company's audit fees. The results of hypothesizes of the study showed that free cash flow of firms and audit fees are positively and significantly related. Also, result showed that the Level of debt used in companies with high free cash flow and audit fees significantly positive and between growth opportunities ratio in companies with high free cash flow and audit fees significantly negative relation were exist. Furthermore, a significant relationship between dividends paid by companies with high free cash flow and audit fees were not established