Agency theory explains the relationship that occurs between two parties in an entity, namely the principal and the agent. The agent will be given delegation of authority to make decisions by the principal (Jensen & Meckling, 1976). Agents in a company have a tendency to utilize company resources and increase income for personal gain (Eisenhardt, 2018).

In terms of monitoring the performance of the agent, the principal requires the role of an independent third party, namely a public accountant. The company will incur a number of costs called monitoring costs in exchange for the services provided by the public accountant. Public accountants also play a role in providing assurance on the financial statements prepared by agents (Januarti & Wiryaningrum, 2018).

Agency theory explains that the existence and activities of an audit committee in a company will optimize the supervisory process and reduce agency problems. Meetings conducted by the audit committee are a method of supervision in terms of preventing conflicts of interest between the principal and the agent.

The audit committee has responsibilities related to the assessment of financial statements, the audit process, the company's financial situation and internal control mechanisms in the company (Bshayreh et al., 2021). In the supply method, increasing the number of meetings held by the audit committee can improve the quality of financial statements. The meetings conducted allow the audit committee to oversee accounting records and the quality of internal control more effectively (Hoque et al., 2013 Lisic et al., 2016) so that it can have an effect on reducing audit fees (Afenya et al., 2022). The more routine audit committee meeting intensity indicates the high quality of the audit committee and low company risk, so that the scope of the external audit process carried out by public accountants will be smaller (Farooq et al., 2018). (Hasan & Naser, 2013) and (Yatim et al., 2006) provide evidence that audit committee activity has a negative effect on audit fees.

In the demand approach, when the audit committee conducts many meetings, this indicates that the audit committee wants good quality financial reports. Companies represented by the audit committee tend to choose reputable public accountants in the hope that the resulting audit report can increase company value. thus in the demand approach the frequency of audit committee meetings has a positive effect on audit fees. (Yasin & Nelson, 2012), (Januarti et al., 2020). Based on the support of previous research and theory, that audit fees can be low or high depending on the approach chosen by the company, so the hypothesis is:

H1: Audit committee activity has a positive (negative) effect on audit fees

Agency theory explains that companies form internal audit units from the start as a way of supervision, before the external audit process is carried out by public accountants. Internal audit in the company can reflect adequate corporate governance, where the company is able to produce financial reports in a timely manner (Harymawan & Putri, 2023). Assessment by internal audit is a form of supervision that can help reduce the scope of work of external auditors, so that the audit fees paid will decrease. (Yasin & Nelson, 2012) internal auditor activity has a positive effect on audit fees.

Based on the support of previous research and theory, the hypotheses proposed in this study are as follows:

H2: Internal audit personnel have a positive (negative) effect on audit fees

According to agency theory, the principal will find it increasingly difficult to supervise the agent's performance as the number of subsidiaries increases. Agency theory also explains the assumption that each individual will act based on their personal interests. The principal requires the services of a third party, namely a public accountant to oversee the performance carried out by the agent.

The complexity of the company can come from the number of subsidiaries it has or can also be influenced by the number of transactions that occur in the company. The complexity of these transactions can reflect an increase in company productivity. The higher the complexity of transactions that occur in the company, the longer the time required for external auditors to conduct audits will be, resulting in an increase in audit fees (Yulio, 2016). Auditors need to collect more audit evidence and expand the scope of the audit with many subsidiaries ((Hasan & Naser, 2013); ((Hassan, 2016); (Hasan, 2017); (Junita & Pratiwi, 2023)).

Based on the support of previous research and theory, the hypotheses proposed in this study are as follows:

H3: Company complexity has a positive effect on audit fees

The research population is manufacturing companies listed on the Indonesia Stock Exchange (IDX) from 2019 to 2022. The secondary data source in this study uses the company's annual report which is accessed through the official website of each company or the Indonesia Stock Exchange website. The research sample uses several criteria. Table 1 shows the sample determination:

The dependent variable is the audit fee, which is a nominal amount based on an agreement between the two parties, namely the client company and KAP, which is paid to the public accountant by the related company (Premananda & Badera, 2018). Audit fees are measured using the natural logarithm of the amount of audit fees in the annual report.

LNAUFEE = Ln (Audit fees)

The first independent variable, the audit committee, is a committee within the company that is responsible for audit quality and oversight of external auditors during the audit process (Alhababsah & Yekini, 2021). Audit committee activity is measured based on the frequency of meetings held by the audit committee during the current period.

ACMEET = Number of audit committee meetings during the year

The second independent variable, internal audit, is an evaluation activity carried out by the internal audit unit independently and objectively with the aim of assisting management (Yusica & Sulistyowati, 2020). Measurement of the internal audit personnel variable is seen from the number of personnel in the internal audit unit.

IAP = Number of internal audit personnel during the year

The third independent variable, company complexity, is assessed based on the level of complexity of transactions carried out in the company (Yusica & Sulistyowati, 2020). Company complexity is measured based on the number of parent and subsidiary companies.

CC = Total parent and subsidiaries during the year

Hypothesis testing is carried out using multiple linear regression analysis models. The regression equation model used is shown as follows:

LNAUFEE = α0 - β1 (LNACMEET) - β2 (LNIAP) + β3 (LNCC) + ε

Description:

LNAUFEE : Audit fees

LNACMEET : Number of audit committee meetings during the year

LNIAP : Number of internal audit personnel during the year

LNCC : Total parent and subsidiaries during the year

α0 : constant

β 1- β2- β3 : coefficient

ε : error coefficient

The sample of companies selected for observation from 2019 to 2022 is 165 observation data. Table 2 shows the results of the descriptive statistics of each variable.

Based on Table 2, the LNAUFEE variable has an average value of 20.820. The minimum value of 18.32 comes from PT Panasia Indo Resources Tbk. in 2021 and 2022. The maximum value of 25.56 comes from PT Astra International Tbk. in 2022. The standard deviation value of 1.358, smaller than the average value, indicates that the distribution of audit fees data is homogeneous.

The audit committee activity variable has a minimum value of 1 from PT Avia Avian Tbk in 2021 and a maximum value of 80 from PT Krakatau Steel Tbk in 2022. Audit committee meetings that were held less than four times during one period indicate that the company has not fulfilled OJK Regulation Number 55 / POJK.04 / 2014 regarding the implementation of audit committee meetings at least once every three months. The companies are PT Indonesian Tobacco Tbk, PT Era Mandiri Cemerlang, and PT Avia Avian Tbk. The average value of 9.958 indicates that on average manufacturing companies hold audit committee meetings 9 times and have fulfilled OJK Regulation Number 55 / POJK.04 / 2014. The distribution of audit committee activity data is heterogeneous because the standard deviation value of 12.02 is greater than the average value.

The minimum value of the internal audit personnel variable is 2 personnel. Meanwhile, the maximum value of 45 personnel in the internal audit unit occurred in 2020 at PT Astra Internasional Tbk. The average number of personnel in the internal audit unit in manufacturing companies is 8.885 or around 8 to 9 personnel. This is in accordance with OJK Regulation Number 56/POJK.04/2015 which states that the composition of members in the internal audit unit consists of one or more personnel. Internal audit personnel data has a homogeneous data distribution because the average value is greater than the standard deviation.

The average value of the company complexity variable is 12.82, which means that the average total parent and subsidiary companies in the manufacturing sector are 12 to 13 companies. The maximum value of 271 comes from PT Astra Internasional Tbk in 2022, which means that the total subsidiaries owned are 270 subsidiaries. The minimum value of 1 illustrates that the company has no subsidiaries, shown in the sample of companies’ PT Akasha Wira International Tbk, PT Darya-Varia Laboratoria Tbk, PT Indonesian Tobacco Tbk, PT Mulia Boga Raya Tbk, PT Pelat Timah Nusantara Tbk, PT Unilever Indonesia Tbk, PT Waskita Beton Precast Tbk, and PT Era Mandiri Cemerlang Tbk. The distribution of data on company complexity variables is heterogeneous because the average value is smaller when compared to the standard deviation.

The normality test shows a value of 0.224 greater than 0.05 said to have a normal distribution. The tolerance value of all variables is 0.812, 0.638 and 0.766, and the VIF value is <10. These results mean that there is no correlation between the independent variables in the regression model. All independent variables are worth more than 0.05. It can be concluded that the difference in residual variance does not occur from one observation period to another because the significance value> 0.05, so there is no heteroscedasticity. The regression model is concluded not to experience autocorrelation because the value of 0.805 is still in the range between -2 to 2.

The results of hypothesis testing can be seen in Table 3.

Based on the test results in Table 3, the audit committee activity has a significance value of 0.90 greater than 0.05. Testing the first hypothesis shows that the audit committee has no positive effect on audit fees. Based on Table 2, it can be seen that the average audit committee meeting is close to 10 times, where the meetings held have exceeded the recommended by OJK Number 55 / POJK.04 / 2014, which is 4 times a year. The number of meetings held does not make audit fees low, because based on Table 3 shows a positive coefficient (0.015), this illustrates that the audit committee tends to choose a reputable KAP, so that the audit fees are higher.

The results of this study support the research of (Sukaniasih & Tenaya, 2016), but contradict the results of (Afenya et al., 2022) which states that audit fees are negatively affected by audit committee activity.

The test results in Table 3 show that the significance value of 0.00 is smaller than 0.05 and the direction of the coefficient of 0.572 is positive, so it can be concluded that internal audit personnel have a positive effect on audit fees. These results are in accordance with agency theory which states that assessment by internal audit personnel is risky, but the company still wants to increase value by choosing a reputable KAP. The results of this study are supported by Bshayreh et al. (Bshayreh et al., 2021). Companies tend to agree to incur more audit fees when internal audit is well implemented with the aim that company supervision can be strengthened (Dzikrullah et al., 2020). The results of this study contradict research by Harymawan & Putri (Harymawan & Putri, 2023) which states that the process and performance of external auditors will be helped by internal audits carried out by internal audit personnel, so that the audit fees paid will decrease.

Company complexity has a significance value of 0.00 according to the test in Table 3. Testing the third hypothesis shows that company complexity has a positive effect on audit fees. This result is in line with agency theory which explains that increasing the number of subsidiaries will increase the risk of agency problems, so that the audit fees paid will be higher.

The results of this study are in line with those conducted by (Junita & Pratiwi, 2023), (Syafii & Dewi, 2022),(Tat & Murdiawati, 2020), and (Yulio, 2016). Auditors need to collect more evidence as the number of subsidiaries owned by the parent company increases. The scope of the audit process will be wider and cause an increase in audit fees. The results of this study contradict those of (Indriasih et al., 2021) which states that there is a possibility that subsidiaries use different external auditor services from the parent company, so there is no influence between company complexity on audit fees.