Intra-Audit Firm Office Changes, Audit Pricing and Accrual Quality

2011 ◽  
Author(s):  
Jamie Diaz
Keyword(s):  
Audit Pricing ◽  
Accrual Quality ◽  
Audit Firm

scholarly journals A Test of Audit Pricing in the Small-Client Segment: A Comment

1995 ◽  
Vol 10 (2) ◽  
pp. 223-233 ◽  
Author(s):  
Willie E. Gist
Keyword(s):  
Product Differentiation ◽  
Firm Size ◽  
Audit Fees ◽  
Price Premium ◽  
Audit Pricing ◽  
Audit Firm ◽  
Size Classes ◽  
Audit Market ◽  
Second Tier ◽  
The U.S

This study is the second to provide a richer test of the association between auditor size and audit fees by using three audit firm size classes in the small-client segment of the U.S. audit market. The finding of a Big 8 (now Big 6) price premium is consistent with Francis and Simon [1]. However, this price premium exists only with respect to local/regional firms. Francis und Simon showed that the Big 8 price premium exists with respect to both second-tier and local/regional firms. The present study also provides evidence of a second-tier price premium over local/regional firms. The results imply product differentiation to both Big 8 and second-tier firms. Plausible reasons for differences in results between the two studies are given.

scholarly journals The effect of large audit firm mergers on audit pricing in the UK

2007 ◽  
Vol 37 (4) ◽  
pp. 301-319 ◽  
Author(s):  
Kevin P. McMeeking ◽  
Ken V. Peasnell ◽  
Peter F. Pope
Keyword(s):  
Audit Pricing ◽  
Audit Firm ◽  
The Uk

The Effect of Supply Chain Knowledge Spillovers on Audit Pricing

2013 ◽  
Vol 26 (1) ◽  
pp. 83-100 ◽  
Author(s):  
Jengfang Chen ◽  
Hsihui Chang ◽  
Hsin-Chi Chen ◽  
Sungsoo Kim
Keyword(s):  
Supply Chain ◽  
Knowledge Spillovers ◽  
National Level ◽  
Audit Fees ◽  
Data Availability ◽  
Audit Pricing ◽  
Audit Firm ◽  
Audit Firms ◽  
Negative Effect ◽  
Office Level

ABSTRACT We present evidence on the effect of audit firms' supply chain knowledge spillover on audit pricing. Analyzing data from Audit Analytics and Compustat for the seven-year period from 2003 to 2009, we find that audit firms' supply chain knowledge has a negative effect on audit fees. Specifically, an audit firm with more supply chain knowledge charges lower audit fees to its clients when the firm also audits its clients' major buyers. In addition, we find that the fee discount is greater when the audit firm possesses major buyer-related supply chain knowledge at the office level compared to the national level. Our findings are consistent, albeit weaker, to an expanded sample of companies that voluntarily disclose their major buyers. Data Availability: The data are publicly available.

scholarly journals Audit Office Size, Audit Quality, and Audit Pricing

2010 ◽  
Vol 29 (1) ◽  
pp. 73-97 ◽  
Author(s):  
Jong-Hag Choi ◽  
Chansog (Francis) Kim ◽  
Jeong-Bon Kim ◽  
Yoonseok Zang
Keyword(s):  
Firm Size ◽  
Audit Quality ◽  
National Level ◽  
Audit Fees ◽  
Specific Factor ◽  
Audit Pricing ◽  
Audit Firm ◽  
Industry Leadership ◽  
Office Size ◽  
Office Level

SUMMARY: Using a large sample of U.S. audit client firms over the period 2000–2005, this paper investigates whether and how the size of a local practice office within an audit firm (hereafter, office size) is a significant, engagement-specific factor determining audit quality and audit fees over and beyond audit firm size at the national level and auditor industry leadership at the city or office level. For our empirical tests, audit quality is measured by unsigned abnormal accruals, and the office size is measured in two different ways: one based on the number of audit clients in each office and the other based on a total of audit fees earned by each office. Our results show that the office size has significantly positive relations with both audit quality and audit fees, even after controlling for national-level audit firm size and office-level industry expertise. These positive relations support the view that large local offices provide higher-quality audits compared with small local offices, and that such quality differences are priced in the market for audit services.

An Empirical Evidence of Audit Firm Merger and Audit Pricing in Malaysia

2007 ◽  
Vol 5 (1) ◽  
pp. 1-19 ◽  
Author(s):  
Hilwani Hariri ◽  
Norshimah Abdul Rahman ◽  
Ayoib Che Ahmad
Keyword(s):  
Empirical Evidence ◽  
Audit Pricing ◽  
Audit Firm

Short-Term Accruals and the Pricing and Production of Audit Services

2010 ◽  
Vol 29 (1) ◽  
pp. 221-250 ◽  
Author(s):  
Caren Schelleman ◽  
W. Robert Knechel
Keyword(s):  
Earnings Management ◽  
Financial Statements ◽  
Audit Fees ◽  
Profit Margin ◽  
Work Effort ◽  
Short Term ◽  
Audit Pricing ◽  
Data Set ◽  
Audit Firm ◽  
Unique Data

SUMMARY: This study investigates how risk associated with increased levels of accruals that might be indicative of earnings management affects the pricing and production of audit services. Francis and Krishnan (1999) suggest that auditors can deal with the risk of earnings management in five ways: (1) screen out high-risk clients; (2) charge a premium to riskier clients; (3) increase audit effort; (4) negotiate adjustments to the financial statements; and/or (5) report more conservatively (e.g., by issuing a modified report). Using a unique data set, the current study investigates two of these options: charging a fee premium and increasing audit effort. Based on previous research on audit pricing and production, we construct models for audit fees, total audit effort, labor mix (extent of experienced auditor effort), and engagement profit margin including an accruals measure that could indicate earnings management. We test these models on a sample of 119 audit engagements from one Big 6 audit firm in The Netherlands. We find that signed short-term accruals are associated with a significant increase in audit fees as well as total effort, but not with experience mix or profit margin. However, we find secondary evidence that auditors utilize more supervisors, assistants and support personnel and earn smaller profits (returns) when a client has higher levels of short-term accruals. Taken together, these results suggest that auditors are responsive to high levels of short-term accruals that may be indicative of earnings management, and will increase their work effort even if they are unable to recoup all of the related costs.

CEO Turnover and Audit Pricing

2014 ◽  
Vol 28 (2) ◽  
pp. 297-312 ◽  
Author(s):  
Hua-Wei Huang ◽  
Robert J. Parker ◽  
Yun-Chia Anderson Yan ◽  
Yi-Hung Lin
Keyword(s):  
Voluntary Turnover ◽  
Audit Fees ◽  
Ceo Turnover ◽  
Data Availability ◽  
Predictor Variables ◽  
Audit Pricing ◽  
Audit Firm ◽  
Audit Firms ◽  
And Control ◽  
The Relationship

SYNOPSIS This study examines the relationship between CEO turnover in client companies and the fees charged by their audit firms. We propose that forced CEO turnover (such as dismissals) pose higher business and audit risks for the audit firm than voluntary turnover (such as retirements); further, greater risk leads to higher audit prices. We develop a regression model of audit fees that includes, as predictor variables, type of CEO turnover and control variables identified in prior studies (e.g., ROA, total assets, and corporate governance). Results reveal that companies with forced CEO turnover have significantly higher audit fees than companies with either voluntary turnover or no turnover. Further, we find no difference in audit fees between firms with voluntary turnover and firms without turnover. Data Availability: The data used in this study are publicly available.

METHODS ASSESSMENT QUALITY OF ACCOUNTING REPORTING AND MODELS OF THEIR MEASUREMENT

2020 ◽  
Vol 3 (3) ◽  
pp. 95-99
Author(s):  
E. H. ABU ◽  
Keyword(s):  
Internal Control ◽  
Stock Prices ◽  
Control Method ◽  
Financial Statements ◽  
Accounting Conservatism ◽  
Standardized Assessment ◽  
Accrual Quality ◽  
Indirect Measures

The article explores individual approaches used to measure and evaluate the quality of financial state-ments: standardized assessment, accrual-based models (accrual quality), Beneise models (M-Score), in-dexes - the internal control method and the degree of accounting conservatism. The reason for the great dependence on the use of indirect measures (proxies for the quality of financial statements or stock prices) is that some of the qualities of financial statements are unobservable.

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