Audit market concentration, audit fees, and audit quality: A cross-country analysis of complex audit clients
AffiliationUniv Arizona, Eller Coll Management
KeywordsAudit market concentration
Cross-country audit fees
Global audit fees
International Financial Reporting Standards
MetadataShow full item record
PublisherELSEVIER SCIENCE INC
CitationGunn, J., Kawada, B., & Michas, P. (2019). Audit market concentration, audit fees, and audit quality: A cross-country analysis of complex audit clients. Journal Of Accounting And Public Policy, 38(6), 106693. doi: 10.1016/j.jaccpubpol.2019.106693
RightsCopyright © 2019 Elsevier Inc. All rights reserved.
Collection InformationThis item from the UA Faculty Publications collection is made available by the University of Arizona with support from the University of Arizona Libraries. If you have questions, please contact us at firstname.lastname@example.org.
AbstractRegulators around the world are concerned about the potentially harmful effects of high audit market concentration on audit pricing and quality. However, results in the overall literature have failed to reach consensus on this issue. We contribute to this debate by arguing that the audit market is segmented and that concentration in the Big 4 segment of the market leads to higher audit pricing. Accordingly, our analyses use international data and focus on concentration within the Big 4 group of firms across countries. We find that audit fees are increasing in our concentration measure for clients where the barriers to entry by competing auditors are higher, as proxied by client size, international operations, and IFRS use. Finally, we find evidence that audit quality is decreasing in Big 4 market concentration for these types of engagements. This indicates a wealth transfer from shareholders to audit firms when auditor concentration is high because these complex clients are charged more, but receive audits that are of lower quality. (C) 2019 Elsevier Inc. All rights reserved.
Note24 month embargo; published online: 14 November 2019
VersionFinal accepted manuscript
SponsorsUniversity of Pittsburgh University of Pittsburgh; San Diego State University; University of Arizona
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