Magnetic flux leakage (MFL) is a non-destructive testing method used to inspect ferrous materials. However, apparatus parameters could affect the MFL inspection tool’s ability to characterize anomalies. In this paper, MFL signals obtained during the inspection of pipes have been simulated using three-dimensional finite element analysis and the effects of magnet assembly on MFL signals are investigated. According to numerical simulations, an increase in the leakage flux amplitude is observed with an increase in the permanent magnet size and the inflexion point may indicate the presence of magnetizing pipe wall to near saturation. It clearly illustrates degradation in the MFL with increasing backing iron length. The relationship between MFL apparatus parameters and MFL signals could be utilized in the MFL technique to characterize the defect.