Abstract

http://ssrn.com/abstract=1011096
 
 

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Audit Office Size, Audit Quality and Audit Pricing


Jong-Hag Choi


Seoul National University - College of Business Administration

Jeong-Bon Bon Kim V


City University of Hong Kong

Chansog (Francis) Kim


The State University of New York at Stony Brook

Yoonseok Zang


Singapore Management University - School of Accountancy

December 3, 2009

Auditing: A Journal of Practice and Theory, Forthcoming

Abstract:     
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 (henceforth, 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.

Number of Pages in PDF File: 42

Keywords: Audit office, Office size, Audit quality, Audit pricing

JEL Classification: M49, M41, L84

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Date posted: August 31, 2007 ; Last revised: April 17, 2013

Suggested Citation

Choi, Jong-Hag and Kim, Jeong-Bon Bon and Kim, Chansog (Francis) and Zang, Yoonseok, Audit Office Size, Audit Quality and Audit Pricing (December 3, 2009). Auditing: A Journal of Practice and Theory, Forthcoming. Available at SSRN: http://ssrn.com/abstract=1011096 or http://dx.doi.org/10.2139/ssrn.1011096

Contact Information

Jong Choi
Seoul National University - College of Business Administration ( email )
Seoul, 151-742
Korea, Republic of (South Korea)
Jeong-Bon Bon Kim V (Contact Author)
City University of Hong Kong ( email )
83 Tat Chee Avenue
Kowloon
Hong Kong
China
Chansog (Francis) Kim
The State University of New York at Stony Brook ( email )
New York 1790
Stony Brook, NY 11794
United States
248-525-4051 (Phone)
631-632-9412 (Fax)
Yoonseok Zang
Singapore Management University - School of Accountancy ( email )
60 Stamford Road
Singapore 178900
Singapore

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