Big 4 audit fee premiums for national- and city-specific industry leadership in the UK: Additional evidence

PurposeUsing the most recent observations (2005‐2011) from a sample of UK listed companies, This paper aims to investigate whether Big 4 audit firms exhibit a “fee premium” and, if this is the case, whether the premium is related to the delivery of a better audit service.Design/methodology/approachUnivariate tests, multivariate regressions and two methodologies that control for self‐selection bias are used to answer the proposed research questions. Data are collected from DataStream.FindingsFindings provide consistent evidence about the existence of an “audit fee premium” charged by Big 4 firms while they do not highlight any significant relationship between audit quality and type of auditor with respect to the audit quality proxies investigated.Research limitations/implicationsEvidence from this paper might signal the need for legislative intervention to improve the competitiveness of the audit market on the basis that its concentrated structure is leading to “excessive” fees for Big 4 clients. Findings might also enhance Big 4 client bargaining power. However, as the paper analyses only one country, generalizability of the results might be a limitation.Originality/valueThis study joins two streams of the extant literature that investigate the existence of a “Big 4 audit fee premium” and different levels of audit quality among Big 4 and non‐Big 4 clients. Evidence supports the concerns raised by the UK House of Lords in 2010 that the concentrated structure of the audit market could be the driver of “excessive” fees for Big 4 clients as it does not find differences in audit quality between Big 4 and non‐Big 4 clients.

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Big 4 Audit Fee Premiums for National and Office-Level Industry Leadership in the United Kingdom

Auditing A Journal of Practice & Theory ◽

10.2308/aud.2007.26.2.143 ◽

2007 ◽

Vol 26 (2) ◽

pp. 143-166 ◽

Cited By ~ 82

Author(s):

Ilias G. Basioudis ◽

Jere R. Francis

Keyword(s):

United Kingdom ◽

Listed Companies ◽

Accounting Firms ◽

The United Kingdom ◽

Big 4 ◽

Industry Leadership ◽

Audit Fee ◽

Second Tier ◽

Office Level

The pricing of Big 4 industry leadership is examined for a sample of U.K. publicly-listed companies, and adds to the evidence from the Australian and U.S. audit markets that city-specific industry leadership commands a fee premium. There is a significant fee premium for city-specific industry leaders relative to other Big 4 auditors, but no evidence that either the top-ranked or second-ranked firm nationally commands a fee premium relative to other Big 4 auditors, after controlling for city-level industry leadership. We also test for Big 4 fee premiums relative to non-Big 4 auditors and the U.K. data suggest a three-level hierarchy based on audit fee differentials: (1) Big 4 city-specific industry leaders have the largest fees; (2) other Big 4 auditors (noncity leaders) and second-tier national firms have comparable fees that are lower than Big 4 city leaders but larger than third-tier firms; and (3) third-tier accounting firms have the lowest fees.

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Spatial Competition in Local Audit Markets and the Fallout on Deloitte from the 2007 PCAOB Censure

Auditing A Journal of Practice & Theory ◽

10.2308/ajpt-51571 ◽

2016 ◽

Vol 36 (2) ◽

pp. 1-19 ◽

Cited By ~ 5

Author(s):

Jeff P. Boone ◽

Inder K. Khurana ◽

K. K. Raman

Keyword(s):

Market Power ◽

Audit Quality ◽

Spatial Competition ◽

Spatial Location ◽

Audit Fees ◽

Audit Market ◽

Big 4 ◽

Audit Fee ◽

The Face ◽

Market Leader

SUMMARY We examine whether Deloitte's spatial location in local audit markets affected the firm's adverse fallout—in terms of decreased ability to retain new clients and maintain audit fees—from the 2007 PCAOB censure. We motivate our inquiry by the notion that auditor-client alignment and auditor-closest-competitor distance can help differentiate the incumbent Big 4 auditor from other Big 4 auditors and thus provide market power, i.e., inhibit clients from shopping for another supplier because of the lack of a similar Big 4 provider in the local audit market. Consequently, it seems reasonable that the increase in switching risk and loss of fee growth suffered by Deloitte following the 2007 PCAOB censure will be lower in local markets where Deloitte was the market leader and its market share distance from its closest competitor was greater. Our findings suggest that the decline in Deloitte's audit fee growth rate following the 2007 PCAOB censure was concentrated in the pharmaceutical industry, although the client loss rate appears to have occurred more broadly (across all cities and industries). Collectively, our findings suggest that audit quality issues override auditor market power, i.e., differentiation does not provide Big 4 firms market power in the face of adverse regulatory action. JEL Classifications: G18; L51; M42; M49.

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Determinantes de costos de auditoría – non audit fee

Cuadernos de Contabilidad ◽

10.11144/javeriana.cc15-39.dcan ◽

2014 ◽

Vol 15 (39) ◽

Author(s):

Arquimedes De Jesus Moraes ◽

Eduardo José Pinheiro ◽

Alexsandro Ronchi Negrelli

Keyword(s):

Stock Exchange ◽

Sao Paulo ◽

São Paulo ◽

Big 4 ◽

Audit Fee

El objetivo de esta investigación es identificardeterminantes de los costos de auditoría (non audit FEE) delas empresas brasileñas. La muestra contempló informacionesde las empresas en la BM&FBOVESPA, que resulta dela fusión entre la São Paulo Stock Exchange (Bovespa) y laBrazilian Mercantile and Futures Exchange (BM&F), entre2009 y 2012. Los resultados indican que el tamaño de laempresa auditada en el final del año fiscal está positivamenterelacionado con los gastos de consultoría; si la empresade auditoría es una Big 4, los honorarios de consultoríano poseen una relación significativa. En contrapartida, losclientes de menor tamaño tendrán costes menores de honorariosde consultoría.

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Narratives of the Big-4 transparency reports: country effects or firm strategy?

Managerial Auditing Journal ◽

10.1108/maj-09-2018-1994 ◽

2019 ◽

Vol 34 (8) ◽

pp. 951-985

Author(s):

Ana Zorio-Grima ◽

Pedro Carmona

Keyword(s):

Content Analysis ◽

Voluntary Disclosure ◽

Methodological Approach ◽

Firm Strategy ◽

Future Research ◽

Content Type ◽

Country Effects ◽

Big 4 ◽

Audit Firms ◽

The Uk

Purpose The purpose of this paper is to examine whether audit firms use transparency reports (TRs) as a tool to standardize their brand image or whether the semantic and content analysis in these reports indicates a higher importance of country effects. Design/methodology/approach The sample includes 28 TRs published in English by the Big-4 audit firms from five EU countries (the UK, Ireland, Luxemburg, Hungary and Malta), as well as in the USA and Australia. Findings Using content analysis, this research finds that there is variation in the language used in TRs both across audit firms and jurisdictions. Most TRs from different countries of the same firm tend to be clustered, suggesting that audit firms use transparency reporting as a strategy to differentiate themselves from their competitors. In fact, EY and KPMG seem to have more standardized internal procedures and standardized information. Regarding country effects, the results indicate that TRs in the UK are longer and show more detailed information. Originality/value Overall, this research is innovative in the sense that it applies a new methodological approach to an emerging topic such as audit transparency reporting. It identifies emerging topics of voluntary disclosure, such as financial data of the firm, gender and ethnic origin of employees, community involvement or sanctions, among other topics of interest which might be explored in detail by future research to understand the construction of the profession.

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Did the 2007 PCAOB Disciplinary Order against Deloitte Impose Actual Costs on the Firm or Improve Its Audit Quality?

The Accounting Review ◽

10.2308/accr-50867 ◽

2014 ◽

Vol 90 (2) ◽

pp. 405-441 ◽

Cited By ~ 56

Author(s):

Jeff P. Boone ◽

Inder K. Khurana ◽

K. K. Raman

Keyword(s):

Growth Rates ◽

Audit Quality ◽

Audit Fees ◽

Data Availability ◽

The Other ◽

Archival Studies ◽

Big 4 ◽

Audit Fee

ABSTRACT We examine whether the December 2007 PCAOB disciplinary order against Deloitte affected Deloitte's switching risk, audit fees, and audit quality relative to the other Big 4 firms over a three-year period following the censure. Our findings suggest that the PCAOB censure was associated with a decrease in Deloitte's ability to retain clients and attract new clients, and a decrease in Deloitte's audit fee growth rates. However, methodologies used in extant archival studies yield little or no evidence to suggest that Deloitte's audit quality was different from that of the other Big 4 firms during a three-year window either before or after the censure. Overall, our results suggest that the PCAOB censure imposed actual costs on Deloitte. Data Availability: All data are publicly available.

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Collaborative approaches to government travel advisories in Australia between Australia’s travel industry leadership and the Australian Department of Foreign Affairs and Trade, 2003–2017

Journal Of Vacation Marketing ◽

10.1177/1356766718757271 ◽

2018 ◽

Vol 25 (1) ◽

pp. 71-87

Author(s):

David Beirman

Keyword(s):

Participant Observation ◽

Foreign Affairs ◽

Australian Government ◽

Collaborative Consultation ◽

Travel And Tourism ◽

The Pacific ◽

Industry Leadership ◽

Travel Industry ◽

The Uk ◽

Australian Department

The October 2002 Bali bombing was a catalyst for the Australian Department of Foreign Affairs and Trade (DFAT) to radically alter its approach to the content and dissemination of Australian government travel advisories. Integral to DFAT’s post-Bali strategy was its decision to seek the collaborative support of the Australian outbound travel industry leadership to broaden dissemination of travel advisories to outbound Australian travellers. Although initial contacts between DFAT and the Australian travel industry leaders in early 2003 were contentious, subsequent negotiations resulted in the world’s first signed agreement between a foreign ministry and a national travel industry leadership in June 2003. The initial agreement, the Charter for Safe Travel involved the Australian travel industry’s commitment to disseminate DFAT travel advisories in exchange for a viable consultative role in their content. Australia’s collaborative model was adopted in the UK from 2004, in Canada from 2005 and New Zealand since 2016. Globally, consultation between national travel industry leaders and national foreign ministries is rare, despite the support of the United Nations World Tourism Organization, the World Travel and Tourism Council and the Pacific Asia Travel Association. Through participant observation research, in the context of collaboration and stakeholder theories, this article discusses the evolution of a consultative relationship between DFAT and the Australian outbound travel industry leadership and other relevant stakeholders between 2003 and 2017. The observations made in this study reveal that collaborative consultation has achieved positive changes to travel advisories which feature regionally specific, timely and comprehensible content. These qualitative enhancements have been complemented by enhanced dissemination of Australian government travel advisories. Australia’s Consular Consultative Group serves as a working model for similar collaboration, in the interests of global tourism safety.

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Audit fee premiums from brand name, industry specialization and industry leadership: A study of the post Big 6 merger in Malaysia

Asian Review of Accounting ◽

10.1108/eb060775 ◽

2004 ◽

Vol 12 (2) ◽

pp. 1-24 ◽

Cited By ~ 5

Author(s):

Mohd Mohid Rahmat ◽

Takiah Mohd Iskandar

Keyword(s):

Brand Name ◽

Industry Specialization ◽

Industry Leadership ◽

Audit Fee

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Audit prices and Big 4 fee premiums: further evidence from Thailand

Journal of Accounting in Emerging Economies ◽

10.1108/jaee-07-2014-0039 ◽

2017 ◽

Vol 7 (1) ◽

pp. 2-15 ◽

Cited By ~ 6

Author(s):

Thanyawee Pratoomsuwan

Keyword(s):

Price Competition ◽

Stock Exchange ◽

Audit Fees ◽

Audit Pricing ◽

Content Type ◽

Audit Market ◽

Big 4 ◽

Audit Fee ◽

The Usa ◽

Using Data

Purpose Because there is mixed evidence regarding Big N fee premiums across countries, the purpose of this paper is to re-examine the phenomenon of audit price differentiations in the market for auditing services in Thailand. Although Hay et al. (2006) and Hay (2013) reviewed over 80 audit fee papers from 20 countries over 25 years, 13 of which were based in emerging economies, the understanding of the market for auditing services in Thailand remains limited. Because the Thai auditing market is also classified as a segmented market – i.e., a market that is less competitive for large-client firms and more competitive for small-client firms – this study tests audit price competition in an emerging audit market using Thailand as an example. Design/methodology/approach The traditional audit fee model is used to estimate audit fee premiums for a sample of over 300 non-financial companies listed on the Stock Exchange of Thailand in 2011. Findings Although the market for auditing services in Thailand is consistent with that described in Ferguson et al. (2013) – in which Big N audit firms dominate only the large-client segment – the results show that Big N auditors charge higher audit fees and earn higher fee premiums compared with non-Big N auditors in both the small- and large-client segments of the audit market. Research limitations/implications The evidence from this study reveals the existence of Big N fee premiums across market segmentations. Audit price differentials between Big N and non-Big N firms in both small- and large-client market segments might concern regulators regarding competition in the audit market with respect to whether the Big N firms are charging uncompetitive audit fees. These findings also imply that audit pricing varies across countries and the Big N price deferential is typically larger in emerging markets than in more developed audit markets and that it might be inadequate to study single-country audit pricing. However, the question whether the Big N fee premium results from Big N product differentiation is not directly investigated in this study. Originality/value Because earlier studies focusing on audit fee premiums have been conducted using data from the USA and Australia, the findings add to the limited evidence regarding audit fee premiums in an emerging country such as Thailand.

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Faktor-faktor Manajemen Risiko terhadap Keputusan Penerimaan Klien pada Sebuah KAP Big4

Berkala Akuntansi dan Keuangan Indonesia ◽

10.20473/baki.v2i1.3631 ◽

2017 ◽

Vol 2 (1) ◽

Author(s):

Mia Selvina

Keyword(s):

Big 4 ◽

Audit Fee

Penelitian ini bertujuan untuk memberikan bukti empiris mengenai evaluasi manajemen risiko pada sebuah kantor akuntan publik non big 4 terhadap keputusan penerimaan klien. Manajemen risiko terbagi menjadi 3 kategori besar yaitu risiko bisnis klien, risiko bisnis audit, risiko bisnis KAP. Sampel yang digunakan pada penelitian ini adalah klien yang mengajukan permohonan jasa audit pada sebuah kantor akuntan publik yang tidak termasuk dalam KAP Big 4. Penelitian ini membuktikan faktor-faktor yang mempengaruhi penerimaan klien pada KAP non big 4 adalah integritas manajemen, risiko bisnis klien, risiko audit, dan audit fee.

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