Are Assurance Services Provided by Auditors on Initial Public Offerings Influenced by Market Conditions?
Paul A. Copley
James Madison University - School of Accounting
Edward B. Douthett Jr.
George Mason University - School of Business
February 5, 2009
Contemporary Accounting Research, Vol. 26, No. 2, 2009
The initial public offering (IPO) market is characterized by large, periodic swings in new issue volume, commonly referred to as hot and cold markets. We compare IPO assurance fees over these cycles controlling for factors that are potentially associated with hot IPO markets. We find that average assurance fees are lower during hot market periods and that fee coefficients associated with certain client- and IPO-specific attributes are lower during hot markets. Our results are consistent with the explanation that IPO assurance services are influenced by varying client demands to defer or accelerate the date of the new issue in order to capitalize on market conditions.
Keywords: Audit demand, initial public offering, audit fees, hot markets
JEL Classification: M40, M42, G12, G24
Date posted: February 5, 2009