An Empirical Evidence of Audit Firm Merger and Audit Pricing in Malaysia

This study is the second to provide a richer test of the association between auditor size and audit fees by using three audit firm size classes in the small-client segment of the U.S. audit market. The finding of a Big 8 (now Big 6) price premium is consistent with Francis and Simon [1]. However, this price premium exists only with respect to local/regional firms. Francis und Simon showed that the Big 8 price premium exists with respect to both second-tier and local/regional firms. The present study also provides evidence of a second-tier price premium over local/regional firms. The results imply product differentiation to both Big 8 and second-tier firms. Plausible reasons for differences in results between the two studies are given.

Download Full-text

The effect of large audit firm mergers on audit pricing in the UK

Accounting and Business Research ◽

10.1080/00014788.2007.9663314 ◽

2007 ◽

Vol 37 (4) ◽

pp. 301-319 ◽

Cited By ~ 26

Author(s):

Kevin P. McMeeking ◽

Ken V. Peasnell ◽

Peter F. Pope

Keyword(s):

Audit Pricing ◽

Audit Firm ◽

The Uk

Download Full-text

Predicting Impending Bankruptcy From Auditor Qualified Opinions And Audit Firm Changes

Journal of Applied Business Research (JABR) ◽

10.19030/jabr.v22i1.1444 ◽

2011 ◽

Vol 22 (1) ◽

Author(s):

David L. Senteney ◽

Yinning Chen ◽

Ashok Gupta

Keyword(s):

Empirical Evidence ◽

Relevant Literature ◽

Explanatory Power ◽

Financial Statement ◽

Compelling Evidence ◽

Font Size ◽

Strategic Response ◽

Audit Firm ◽

Audit Firms

Unlike prior research, we investigate the incremental explanatory power of both auditor qualified opinions and auditor changes beyond the information conveyed by traditional financial statement ratios in predicting bankruptcy. We find that qualified auditor opinion and auditor changes are both important in predicting impending bankruptcy and that auditor changes convey important information not reflected in auditor qualified opinions alone.  In fact, we find compelling evidence that auditor changes provide incremental explanatory power in predicting impending firm failure beyond what is conveyed by auditor qualified opinions and traditional financial statement ratios considered jointly.  Although the existing relevant literature provides no empirical evidence in this regard to our knowledge, this result is intuitive as one motivation for clients to change audit firms is to seek less conservative professional auditors as a strategic response to manifestation of the financial statement effects of bankruptcy.

Download Full-text

The Effect of Supply Chain Knowledge Spillovers on Audit Pricing

Journal of Management Accounting Research ◽

10.2308/jmar-50646 ◽

2013 ◽

Vol 26 (1) ◽

pp. 83-100 ◽

Cited By ~ 3

Author(s):

Jengfang Chen ◽

Hsihui Chang ◽

Hsin-Chi Chen ◽

Sungsoo Kim

Keyword(s):

Supply Chain ◽

Knowledge Spillovers ◽

National Level ◽

Audit Fees ◽

Data Availability ◽

Audit Pricing ◽

Audit Firm ◽

Audit Firms ◽

Negative Effect ◽

Office Level

ABSTRACT We present evidence on the effect of audit firms' supply chain knowledge spillover on audit pricing. Analyzing data from Audit Analytics and Compustat for the seven-year period from 2003 to 2009, we find that audit firms' supply chain knowledge has a negative effect on audit fees. Specifically, an audit firm with more supply chain knowledge charges lower audit fees to its clients when the firm also audits its clients' major buyers. In addition, we find that the fee discount is greater when the audit firm possesses major buyer-related supply chain knowledge at the office level compared to the national level. Our findings are consistent, albeit weaker, to an expanded sample of companies that voluntarily disclose their major buyers. Data Availability: The data are publicly available.

Download Full-text

Audit Office Size, Audit Quality, and Audit Pricing

Auditing A Journal of Practice & Theory ◽

10.2308/aud.2010.29.1.73 ◽

2010 ◽

Vol 29 (1) ◽

pp. 73-97 ◽

Cited By ~ 223

Author(s):

Jong-Hag Choi ◽

Chansog (Francis) Kim ◽

Jeong-Bon Kim ◽

Yoonseok Zang

Keyword(s):

Firm Size ◽

Audit Quality ◽

National Level ◽

Audit Fees ◽

Specific Factor ◽

Audit Pricing ◽

Audit Firm ◽

Industry Leadership ◽

Office Size ◽

Office Level

SUMMARY: Using a large sample of U.S. audit client firms over the period 2000–2005, this paper investigates whether and how the size of a local practice office within an audit firm (hereafter, office size) is a significant, engagement-specific factor determining audit quality and audit fees over and beyond audit firm size at the national level and auditor industry leadership at the city or office level. For our empirical tests, audit quality is measured by unsigned abnormal accruals, and the office size is measured in two different ways: one based on the number of audit clients in each office and the other based on a total of audit fees earned by each office. Our results show that the office size has significantly positive relations with both audit quality and audit fees, even after controlling for national-level audit firm size and office-level industry expertise. These positive relations support the view that large local offices provide higher-quality audits compared with small local offices, and that such quality differences are priced in the market for audit services.

Download Full-text

Mandatory audit firm rotation and auditor independence: empirical evidence from Nigerian listed banks

International Journal of Auditing Technology ◽

10.1504/ijaudit.2013.052245 ◽

2013 ◽

Vol 1 (1) ◽

pp. 5

Author(s):

Apedzan Emmanuel Kighir

Keyword(s):

Empirical Evidence ◽

Auditor Independence ◽

Audit Firm ◽

Mandatory Audit Firm Rotation

Download Full-text

On the Political Decision of Audit Market Regulation: Empirical Evidence of Audit Firm Tenure and Maximum Durations within the European Union

Economies ◽

10.3390/economies9020079 ◽

2021 ◽

Vol 9 (2) ◽

pp. 79

Author(s):

Markus Widmann ◽

Florian Follert ◽

Matthias Wolz

Keyword(s):

European Union ◽

Empirical Evidence ◽

Magic Number ◽

Political Agenda ◽

Market Regulation ◽

The European Union ◽

Audit Firm ◽

Audit Market ◽

Starting Point ◽

The Eu

After almost every economic crisis and corporate scandal, political actors announce the need for stricter regulatory measures for financial markets and companies, in an attempt to appease their voters and defend their political agenda. Regarding the latest international financial crisis, the EU responded, among other things, with comprehensive regulation of the European audit market. In the context of auditor rotation, after 17 June 2016, the duration of audit engagements should not exceed a maximum of 10 years. In this paper, we therefore investigate whether there is empirical evidence behind the 10-year threshold—or is it simply arbitrary? Our aim is to evaluate the audit market reform by the European Union (EU) (Regulation (EU) No 537/2014 and Directive, 2014/56/EU) related to the objective of improving the quality of audits. Therefore, our article addresses the most crucial element of this reform, the implementation of a mandatory audit firm rotation for public interest entities (Regulation (EU) No 537/2014, Article 17). Based on a unique dataset of 11,834 firm observations from all listed companies within the EU between 2008 and 2017, we provide for the first time a discussion basis for the assessment of audit market interventions by the EU. Hence, we compare the new maximum durations with average audit tenure in the particular member states. Even where we present only descriptive results, our results at least indicate that the “magic number” 10 (years) could be more the result of a political process—i.e., a consent between the European institutions—rather than evidence based. Therefore, our findings shall serve as a first starting point in the discussion of a vast and interdisciplinary research field.

Download Full-text