Audit Pricing, Audit Concentration, and Big-4 Premium in Bangladesh

43 Pages Posted: 23 May 2010

See all articles by A.K.M. Waresul Karim

A.K.M. Waresul Karim

Saint Mary's College of California - Graduate Business Programs

Date Written: February 23, 2010


This paper reports the findings of a comprehensive study of the audit services market of an emerging market economy, namely, Bangladesh. It covers four important aspects of auditing in the country. They are (i) audit concentration; (ii) audit fee trends; (iii) big-four premium; and (iv) audit pricing. Using both conventional and innovative measures of audit concentration, it shows that unlike the market structures commonly found in most developed and many developing country settings, the big-four affiliated audit firms (equivalent to the big-four in countries where big-four firms operate in their own names) do not enjoy significant market power in Bangladesh. They are responsible for auditing only 16.4 percent of listed companies. Their market share ranges from 17.6 percent to 56.1 percent depending on the measure of market share used. This lack of dominant market power might have inhibited their ability to charge fee premia as reflected in their average audit fee standardized by client size. The second issue examined in this paper is the trends in audit fees. The paper reports that while audit fee is apparently increasing in absolute terms, it is indeed declining in relation to growth in client size (i.e., value audited) and also in terms of the purchasing power of the local currency. The third issue analyzed in this paper is whether the big-four affiliated firms in Bangladesh charge any fee premia from their audit clients. Interestingly, although the big-four affiliated firms appear to receive higher average audit fees per client, an in-depth look at their audit fee levels reveals that they actually receive lower average audit fees per unit of client sales or client assets. However, when audit fees are standardized for natural logs of client sales and assets, big-four audit fees are found to be marginally higher than those charged by their non-big counterparts. Finally, the paper revisits audit fee models developed on emerging market economies by Simon et al (1986), Karim and Moizer (1996), Simon (1997) and Ahmed and Goyal (2005) etc.

Keywords: Audit Pricing, Audit Concentration, Big-4 Premium

JEL Classification: G32, M41, M42

Suggested Citation

Karim, A.K.M. Waresul, Audit Pricing, Audit Concentration, and Big-4 Premium in Bangladesh (February 23, 2010). Available at SSRN: or

A.K.M. Waresul Karim (Contact Author)

Saint Mary's College of California - Graduate Business Programs ( email )

United States

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