EconPapers    
Economics at your fingertips  
 

The effects of advertising and solicitation on audit fees

David Hay and W. Robert Knechel

Journal of Accounting and Public Policy, 2010, vol. 29, issue 1, 60-81

Abstract: Leading academic and professional accountants have suggested that the crisis in auditing over the past few years may have had its origin in deregulation which allowed firms to advertise their services and solicit new clients, encouraging accounting firms to become more commercial. In this paper, we look at this issue in New Zealand which has the unique distinction of having separated two key forms of deregulation, namely advertising and solicitation, by 6Â years. This allows us to separately examine the effect of each form of market competition on audit fees. We find that advertising is associated with increases in fees, not decreases, which suggests that quality-based advertising took place, and not price-based advertising. In contrast, solicitation corresponded with a general decrease in average fees for clients of the Big 8. We interpret this result as indicating an increase in competition among accounting firms. Our results suggest that there may be a much more complex relationship among market competition, advertising and solicitation, and fees than the arguments used to originally justify deregulation.

Keywords: Auditing; Audit; fees; Competition; Deregulation; Advertising; Direct; solicitation (search for similar items in EconPapers)
Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (8) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0278-4254(09)00083-0
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jappol:v:29:y::i:1:p:60-81

Access Statistics for this article

Journal of Accounting and Public Policy is currently edited by L. A. Gordon

More articles in Journal of Accounting and Public Policy from Elsevier
Bibliographic data for series maintained by Nithya Sathishkumar ().

 
Page updated 2021-06-11
Handle: RePEc:eee:jappol:v:29:y::i:1:p:60-81