 A Review of the Empirical Literature on Audit Market ConcentrationHany Elbardan,
Amr Kotb and
Maria Ishaque
The International Journal of Accounting (TIJA), 2023, vol. 58, issue 02, 1-34 Abstract: SynopsisThe research problemThe extant audit market concentration (AMC) literature is quite scattered, which makes it challenging to comprehend the current state of knowledge and to highlight the areas that require further exploration. An improved understanding of AMC and its possible effects require a comprehensive review of the AMC literature, since no such review has yet been published. Therefore, our paper intends to: (a) synthesize the empirical work in the AMC literature; (b) determine the limitations in the ways AMC has been investigated; (c) identify avenues of inquiry that could guide future thinking on AMC; and (d) develop insights into how future AMC investigations can be further developed.MotivationThe most noticeable developments in AMC occurred after the audit firm megamergers of the 1980s and 1990s and Andersen’s demise in 2002. This trend toward fewer and larger suppliers of auditing services has sparked intense debate about the costs and benefits of AMC. However, the literature provides mixed evidence on the determinants and consequences of AMC.Adopted methodologyA structured literature review [Massaro, M., Dumay, J., & Guthrie, J. (2016). On the shoulders of giants: Undertaking a structured literature review. Accounting, Auditing and Accountability Journal, 29(5), 767–801. https://doi.org/10.1108/AAAJ-01-2015-1939] was employed to review the extant AMC literature.AnalysesWe analyzed 108 empirical papers published in 39 peer-reviewed quality accounting and auditing journals in the English language over a 55-year period (1967 to mid-2021).FindingsThe analysis suggests a consistent rise in AMC levels, leading to a tight oligopoly and, in rare cases, to a duopoly, across countries and over time. Studies of audit pricing and audit quality comprise the predominant part of the literature, and these report mixed findings as to whether AMC facilitates monopolistic pricing and allows audit-quality-threatening behaviors. This could be attributed to several factors, including the focus on short-term effects of AMC; substantial variations in how concentration was measured; and misguided use of proxies for audit competition and audit quality. The review identifies four key limitations that circumscribe our understanding of AMC: (a) the lack of investigation into the actual dynamic rivalry among audit firms; (b) great reliance on the positivistic approach and quantitative methods, and the lack of use of explicit theories aside from economic theories; (c) a focus on the audit of publicly listed companies in the United States, the U.K., and Australia; and thus; (d) the absence of key organizational settings and central regions in the AMC debate. To counter these limitations, this review puts forward possible future research avenues that can help to advance our understanding of AMC to address emerging challenges in the field. Keywords: Audit market concentration; audit competition; Big Four (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:wsi:tijaxx:v:58:y:2023:i:02:n:s1094406023500063 Ordering information: This journal article can be ordered from DOI: 10.1142/S1094406023500063 Access Statistics for this article The International Journal of Accounting (TIJA) is currently edited by A. Rashad Abdel-khalik More articles in The International Journal of Accounting (TIJA) from World Scientific Publishing Co. Pte. Ltd. |
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