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, 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.

Date: 2006
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