What matters in audit pricing: industry specialization or overall market leadership?

Andrew C. Ferguson, Jere R. Francis and Donald J. Stokes

Accounting and Finance, 2006, vol. 46, issue 1, pages 97-106

Abstract: Ferguson "et al." (2003) report that audit industry fee premia primarily reside with joint national and city-specific industry leadership as opposed to merely firm-wide (national) industry expertise, suggesting auditor choice among the Big 5 is best conceptualized on joint industry specialization in city-specific markets and nationally. The present study examines whether the prior results could be confounded by the presence of city-specific overall market leadership effects. Our findings reaffirm that joint local and national auditor industry expertise is valued by audit clients. Furthermore, overall city-specific leadership, by itself, also matters in fee determination and results in higher fees, although at a slightly weaker level of statistical significance. Copyright The Authors
Journal compilation (c) 2006 AFAANZ.

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