City-Level Auditor Industry Specialization, Economies of Scale, and Audit Pricing
We examine the effects of city-level auditor industry specialization and scale economies on audit pricing in the United States. Using a sample of Big N clients for the 2000–2007 period, and a scale measure based on percentile rankings of the number of audit clients at the city-industry level, we doc...
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Veröffentlicht in: | The Accounting review 2012-07, Vol.87 (4), p.1281-1307 |
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Sprache: | eng |
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Zusammenfassung: | We examine the effects of city-level auditor industry specialization and scale economies on audit pricing in the United States. Using a sample of Big N clients for the 2000–2007 period, and a scale measure based on percentile rankings of the number of audit clients at the city-industry level, we document significant specialization premiums and scale discounts in both the pre- and post-Sarbanes-Oxley Act (SOX) periods. However, the effects of industry specialization and scale economies on audit pricing are highly interactive. The negative effect of city-industry scale on audit fees obtains only for clients of specialist auditors. By contrast, clients of non-specialist auditors obtain scale discounts only when they enjoy strong bargaining power, suggesting that auditors are "forced" to pass on scale economies to clients with greater bargaining power. |
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ISSN: | 0001-4826 1558-7967 |
DOI: | 10.2308/accr-10275 |