This study investigates the factors affecting the level of audit fees paid by companies to their auditors. Firstly, all the likely factors thought to be affecting the level of audit fees were identified through a literature survey. These factors were classified into three groups i.e., size, complexity, and others. The relative importance of these factors was determined empirically and statistically. The empirical study was undertaken by mailing two questionnaires to samples of 100 companies, and 100 audit firms. Preliminary interviews were carried out in order to identify if the most important factors collected through the literature should be considered suitable for further inclusion in the final questionnaire. The questionnaires were not used to collect data or to quantify the subjective factors. They were used to assess the degree to which the factors previously identified were important determinants of the audit fee, and whether other determinants should also be considered. The data for the statistical analysis was obtained from published data i.e., Data Stream, Companies' Annual Reports, and Who Owns Whom. In carrying out the statistical analysis, Multiple Regression arid Principal Component Techniques were used to assess the magnitude of the association between the size and complexity factors and audit fees. An audit fee regression model was developed which explains 90Y. of the variation in audit fees of the largest 65 manufacturing companies in the U.K. on the basis of their size and complexity. The results of both the empirical study, and the statistical analysis revealed that the company size (in terms of debtors, stocks work in progress, turnover, creditors, and total employment costs), and its complexity (in terms of number of subsidiaries, and number of countries in which the company operates) are the major objective determinants of audit fees. The empirical study also revealed that the quality of the company's internal control system, competition in the audit market, and the risk involved in the audit work are the major subjective determinants of audit fees. In addition, the statistical analysis revealed that the factors debtors, number of subsidiaries, and total employment costs are the most significant predictors of audit fees, and the audit fee model which involves these three factors explains 92Y. of the variation in audit fees.