Theoretically, the principal-agent problem can affect audit fees due to the need for an auditor to monitor the business entity. In fact, auditing has a place in the regulatory aspect of any system and has a wide range of applications from the highest levels of state administration to smallest business units. Any system needs monitoring and feedback for its sustainability, but despite the extent and importance of audit works, there is no scientific model in Iran for determining audit fees. Active companies in the market wish to outdo the competition, while at the same time they have to find ways of reducing the existing costs that puts them under much pressure. The purpose of the present research considers property, plant, and equipment, sales, and corporate costs as the basis for competition (independent variables) and audit fee as the agency cost of firms (the dependent variable) to examine the relationship between competition and audit fees. 67 companies in 6 fiscal years (2006-2011) were selected as sample. The results of the regression model indicate that there is a significant negative relationship between competition and audit fees.

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