Governmental customer concentration and audit pricing
Hanmei Chen,
Weishi Jia,
Shuo Li and
Zenghui Liu
Managerial Auditing Journal, 2021, vol. 36, issue 2, 334-362
Abstract:
Purpose - The purpose of this paper is to examine how the concentration of a specific customer type – governmental customer, affects the pricing of audit services in the USA. Design/methodology/approach - This paper applies a standard audit pricing model by regressing audit fees on governmental customer concentration and other common determinants of audit fees. This paper also adopts an instrumental variable approach and performs propensity-score matched sample analyzes to mitigate the potential endogeneity problem. Findings - Using data from major customer disclosures of US publicly listed firms from 2000 to 2014, this paper finds that governmental customer concentration is positively associated with audit fees, suggesting that a higher level of governmental customer concentration increases a firm’s audit risks and audit effort. In addition, this paper performs cross-sectional analyzes and show that the association between governmental customer concentration and audit fees is more pronounced for firms with weak internal governance, weak external monitoring and high financial risks. Originality/value - This paper furthers the understanding of the interactive relationships in supply chain systems and adds new evidence to the literature on customer concentration. Prior studies on customer concentration typically treat all customer types in a uniform manner. To the knowledge, this is the first study that separates governmental customers from other types of customers in an audit pricing setting. The findings highlight the importance of examining governmental customer concentration when assessing a firm’s audit risks and audit fees.
Keywords: Supply chain; Audit pricing; Customer concentration; Governmental audit; M41; M42; H57 (search for similar items in EconPapers)
Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (4)
Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers
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:eme:majpps:maj-01-2019-2159
DOI: 10.1108/MAJ-01-2019-2159
Access Statistics for this article
Managerial Auditing Journal is currently edited by Professor Jie Zhou
More articles in Managerial Auditing Journal from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().