Audit Fees, Big Four Premium and Institutional Settings: The Devil is in the Details!

2011 ◽  
Author(s):  
Paul André ◽  
Géraldine Broye ◽  
Christopher K.M. Pong ◽  
Alain Schatt
Keyword(s):  
Audit Fees ◽  
Institutional Settings ◽  
The Devil ◽  
Big Four

scholarly journals Determinants of audit fees: Evidence from Poland

2020 ◽  
Vol 6 (53) ◽  
pp. 323-336
Author(s):  
Karol Rewczuk ◽  
Piotr Modzelewski
Keyword(s):  
Western Europe ◽  
Central And Eastern Europe ◽  
Stock Exchange ◽  
Financial Statements ◽  
Audit Fees ◽  
The United States ◽  
Accounting Firms ◽  
Warsaw Stock Exchange ◽  
A Company ◽  
Big Four

AbstractUnlike many studies concerning audit fees in Western Europe or the United States, literature concerning this kind of research is very limited in Central and Eastern Europe. This study aimed to show what factors shape audit fees in Poland. It was conducted based on data collected from the financial statements of 111 companies listed on the Warsaw Stock Exchange in 2018. The study used a linear regression model to verify the determinants of audit fees. The research results indicate a positive relationship between audit fees and company size, measures of complexity (in addition to the ratio of inventories and receivables to total assets) and the fact that a company is audited by the ‘Big Four’ accounting firms.

scholarly journals Determinants of Audit Fees for Portugal and Spain

2019 ◽  
Vol 65 (4) ◽  
pp. 193
Author(s):  
Ana Sofia Valente Cunha Silva ◽  
Helena Coelho Inácio ◽  
Elisabete F. Simões Vieira
Keyword(s):  
European Union ◽  
Iberian Peninsula ◽  
Cultural History ◽  
Audit Fees ◽  
Ordinary Least Squares ◽  
The European Union ◽  
Audit Firm ◽  
Financial Scandals ◽  
Big Four

<p>This paper intends to analyze the determinants of audit fees in Portugal and Spain at a time when the audit profession has felt increasingly strong pressures on its ethical, independence and quality posture, showing that audit fees behave differently in these two countries. The liberalization of audit services in Portugal, with the elimination in 2005 of the table setting the minimum fees based on the size standards of the audited company, arouses the interest in perceiving the factors that determine audit fees. In Spain, the various financial scandals have placed audit fees in the main focus. These countries, which form the Iberian Peninsula, have a strongly related economic and cultural history, having also joined the European Union on the same date. In addition, audit fees have not been much studied in these countries, so it is important to perceive their behavior by comparing results. The results indicate that, in Spain, audit fees are determined mainly by the size, complexity and risk of the audited company. It was also found that in Spain the big four companies charge higher fees and that companies that change their audit firm pay lower fees in the year of rotation. In Portugal, the size of the audited company was considered the only factor contributing to the determination of audit fees. The analysis includes a sample of 39 listed companies in Portugal and 104 companies listed in Spain for the period of 2013 to 2015 using the ordinary least squares.</p>

Local accounting firms’ pricing responses to entry of the Big Four accounting firms into China

2016 ◽  
Vol 6 (1) ◽  
pp. 50-68 ◽  
Author(s):  
Vikram Desai ◽  
Bixia Xu ◽  
Tao Zeng
Keyword(s):  
Market Entry ◽  
Audit Fees ◽  
Annual Reports ◽  
Pricing Strategies ◽  
Accounting Firms ◽  
Content Type ◽  
Audit Market ◽  
The Usa ◽  
Audit Reports ◽  
Big Four

Purpose – The historical development and size of China’s audit market provides an opportunity to investigate important questions regarding the functioning of the market for audit services that are difficult, if not impossible, to test in other globally established markets. The purpose of this paper is to examine the effect of the market entry of the Big Four accounting firms into China on the audit fees charged by its local accounting firms. Design/methodology/approach – In this paper the authors rely primarily on the incumbent pricing literature (Simon, 2005; Geroski, 1995) to assist them in developing the specific hypotheses and empirical tests. This paper is an empirical study, which examines whether local incumbent accounting firms cut prices in response to the Big Four’s entry by using data from annual reports and audit reports for China’s listed companies from the 1994 to 2008 period. Findings – This study shows that local incumbent firms cut prices post-entry. This study also finds that it was local large-sized accounting firms as well as accounting firms located in regions with highly developed- and competitive markets that cut prices in response to the Big Four’s entry. Practical implications – This study has important implications for the Big Four accounting firms as it provides useful information about pricing strategies that would likely be used by local accounting firms in a new market. Local accounting firms in emerging markets can also gain useful insights about the pricing strategies adopted by the Big Four accounting firms when they enter a market. Originality/value – Audit market research has little to offer on how local accounting firms respond in their pricing to the entry of Big Four accounting firms into their market, mainly because in western countries such as Canada, England, and the USA, the Big Four accounting firms are the oldest firms operating in those markets. This paper is the first study that examines the effect of the market entry of the Big Four accounting firms into China.

scholarly journals Determinants of audit fees in developing countries: Evidence from Egypt

2020 ◽  
Vol 17 (2) ◽  
pp. 142-156
Author(s):  
Walid ElGammal ◽  
Marwa Gharzeddine
Keyword(s):  
Political Stability ◽  
Audit Fees ◽  
Audit Pricing ◽  
Egyptian Revolution ◽  
External Auditors ◽  
Knowing That ◽  
Environmental Attributes ◽  
Significant Difference ◽  
Good Reputation ◽  
Big Four

The aim of this study is to examine the perceived level of importance with respect to each pre-suggested determinant of audit fees in Egypt. In particular, the perceptions about auditor related attributes and client-related attributes according to external auditors and client’s representatives (auditee). This study is based on the results of a survey conducted in Egypt. A questionnaire is designed to request the opinions of external auditors and client representatives about 28 audit fees determinant. The questionnaire was sent to 150 participants out of whom 63 responses are found usable. Data is analyzed using SPSS program and Mann-Whitney U test is performed. The results reveal that the perception of all attributes is greater than 3, implying that all pre-suggested determinants are perceived as relatively important, important or highly important. The most three important attributes are: the good reputation of the audit firm, the fact of being one of the Big Four and the level of complexity of the auditee. Furthermore, the results show that there is no significant difference in perceptions of both group of participants regarding the importance of each audit fees determinant. It is also evident that auditor-related attributes are perceived to be of higher importance than client-related attributes. This is the first study conducted in Egypt examining the determinants of audit fees, knowing that audit fees figures are neither available nor publically disclosed. Moreover, the study takes into account the Egyptian revolution which started in 2011 by adding two new determinants to the questionnaire; economic and political stability. This is in order to cope with the country’s situation and to check the extent of such environmental attributes’ effect on audit pricing.

scholarly journals ¿Influyen los auditores en la agresividad fiscal de sus clientes? Evidencia empírica en las compañías españolas no cotizadas

2022 ◽  
Vol 25 (1) ◽  
pp. 16-30
Author(s):  
Juan Monterrey Mayoral ◽  
Amparo Sánchez Segura
Keyword(s):  
Empirical Evidence ◽  
Empirical Test ◽  
Audit Fees ◽  
Listed Companies ◽  
Tax Planning ◽  
Tax Credits ◽  
High Quality ◽  
Planning Strategy ◽  
Big Four

The purpose of our study was to carry out an empirical test of the extent to which auditors have an influence on the tax practices of the audited firm. Based on a wide sample of Spanish non-listed companies for the period 2009-2017, we have obtained consistent empirical evidence revealing that the choice of a high-quality auditor has a significant impact on the tax planning strategy of the firm. Companies show a greater tax planning aggressiveness when they are audited by one of the Big Four. Notwithstanding, leverage and the existence of tax credits are factors mitigating that aggressiveness. Moreover, abnormally higher audit fees do not seem to be an incentive for the auditor to cooperate in the tax strategies of the audited company. Our results are robust and remain unaltered after adjusting for the potential heterogeneity inherent to auditor’s choice and using alternative variable specifications. Nuestro estudio tiene por objeto verificar empíricamente en qué medida los auditores influyen en las prácticas fiscales de sus clientes. Tomando una amplia muestra representativa de compañías españolas no cotizadas para el periodo comprendido entre 2009 y 2017, hemos documentado resultados empíricos que dejan constancia de que la elección de un auditor de calidad induce un significativo impacto en las estrategias de planificación fiscal de las empresas, que muestran una mayor agresividad tributaria cuando son auditadas por una Big Four. No obstante esta evidencia, el endeudamiento y la presencia de créditos fiscales pendientes de aprovechamiento se erigen como factores mitigantes de esta conducta. Además, la percepción por el auditor de un nivel de honorarios anormalmente elevados no parece generar incentivos para cooperar en las estrategias fiscales de la compañía auditada. Los resultados que hemos documentado son robustos y se mantienen inalterados tras corregir la posible endogeneidad inherente a la elección del auditor y ensayar con especificaciones alternativas de variables.

IFRS adoption/reporting and auditor fees: the conditional effect of audit firm size and tenure

2020 ◽  
Vol 28 (4) ◽  
pp. 639-666
Author(s):  
Medhat N. El Guindy ◽  
Nadia Sbei Trabelsi
Keyword(s):  
Audit Fees ◽  
Content Type ◽  
Audit Firm ◽  
Ifrs Adoption ◽  
Audit Firms ◽  
Conditional Effect ◽  
The Uk ◽  
The Cost ◽  
First Time ◽  
Big Four

Purpose This paper aims to investigate the impact of International Financial Reporting Standards (IFRS) adoption on audit and non-audit fees in the UK setting. The study investigates whether UK firms adopting IFRS for the first time or reporting under IFRS, in general, are being charged higher audit and non-audit fees and whether this impact is conditional on audit firm size and tenure. Design/methodology/approach Using empirical data for UK listed firms from 2003-2007, the paper uses a regression model that explains audit and non-audit fees by independent variables measuring auditors’ and auditees’ characteristics including IFRS adoption and reporting. Additional regressions with interaction terms were performed to test the hypothetical conditional impact of auditor size and audit firm tenure on the above-mentioned association. Findings Audit and non-audit fees increase significantly for companies adopting IFRS for the first time and this increase is persistent during later years. In addition, results suggest that both Big four and non-Big four auditors charge higher audit and non-audit fees to their clients adopting or reporting under IFRS in a similar manner. Furthermore, findings indicate that audit firms increase audit and non-audit fees for old and new clients using IFRS which suggests no low-balling effect is detected. Research limitations/implications Results reported in this study provide insights to regulators in jurisdictions similar to the UK regarding the cost of IFRS adoption which includes higher audit and non-audit fees imposed by both Big four and non-Big four audit firms. In addition, this study argues, to some extent, against the notion that auditors may charge lower fees in the early years of the audit engagement to win new audit clients. Originality/value To the best of the knowledge, the findings are unique at two levels. First, the paper provides evidence on the cost of using IFRS in the UK jurisdiction which was not explored by previous research. Second, the paper investigates the potential conditional effect of auditor size and audit tenure on the association between IFRS adoption and auditors’ fees.

scholarly journals Concentration of the Audit Market: Evidence from Serbia

2015 ◽  
Vol 52 (1) ◽  
pp. 115-126
Author(s):  
Kristina Mijić ◽  
Dejan Jakšić ◽  
Bojana Vuković
Keyword(s):  
Concentration Ratio ◽  
Audit Fees ◽  
Market Concentration ◽  
Independent Variables ◽  
Audit Market ◽  
Audit Firms ◽  
The Republic ◽  
Big Four ◽  
Operating Revenue

Abstract This paper presents a research on market concentration of audit services in the Republic of Serbia during the 2008-2011 period. Market concentration was measured by Herfindahl-Hirschman index (HHI) and concentration ratio CR4, based on four independent variables: operating revenue, net earnings, number of employees and number of audit clients. The research of market concentration based on operating revenue as the most referential variable indicated that the market for audit services in the Republic of Serbia has a moderate concentration and that it has the characteristics of an oligopoly of four largest audit firms known as “Big Four”. However, research of market concentration, when other variables are taken in consideration, does not reveal dominance of “Big Four” in terms of net earnings, number of employees and number of clients. The differences in conclusions when different variables are concerned can be explained by relatively high audit fees of “Big Four” and a lack of correlation between operating revenue and net earnings.

scholarly journals PENGARUH KEPEMILIKAN PERUSAHAAN, CORPORATE GOVERNANCE, DAN EARNINGS MANAGEMENT TERHADAP TIPE AUDITOR DAN AUDIT FEES (Studi Empiris Pada Perusahaan yang Terdaftar di BEI dan IICG Tahun 2011-2013)

2016 ◽  
Vol 4 (2) ◽  
pp. 109
Author(s):  
Gandhi Prayurgi
Keyword(s):  
Corporate Governance ◽  
Earnings Management ◽  
Stock Exchange ◽  
Audit Fees ◽  
Total Sample ◽  
Firm Ownership ◽  
Natural Logarithm ◽  
Other Information ◽  
Big Four ◽  
Selection Of

Audit Fee is a dilemmatic problem for an auditor because auditor get a fee from the audited client. On the other side, auditor must be independent in giving their opinion while they also get a fee for services rendered. The purpose of this study is to provide information to companies, auditors, and other information users about the factors that influence the company in selecting the type of auditors and audit fees. The independent variables in this study ar Firm Ownership, Corporate Governance, and Earnings Management with the dependent variablesare the type of auitor and audit fees. Firm ownership in this study was divided into two, the state-owned companies (BUMN)and private companies. Earnings management was measured by discreationary acccruals (DACC) Jones model. Corporate governance in this study was measured by looking at Corporate Governance Perception Index (CGPI). Type of auditors in this study were divided into two, KAP the big four and non-the big four. Audit fees in this studywas measured by natural logarithm of the professional fees. The population of this study is companies listed in the Indonesian Stock Exchange (IDX) and also listed in the Indonesian Institute of Corporate Governance (IICG) in 2011- 2013 with the total sample is 51 company datas for 3 years. The hypotheses in this study were tested using logistic regression and multiple regression. The results of this study indicate that firm ownership does not influence the selection of the type of auditors and audit fees, while corporate governance and earnings management influence the selection of the type of auditors and audit fees.

The devil and William Dabney. An epidemiological postscript

JAMA ◽  
1966 ◽  
Vol 195 (8) ◽  
pp. 645-648
Author(s):  
F. J. Spencer
Keyword(s):  
The Devil
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