Will the Auditing Industry Become a Tighter or Looser Oligopoly?

Posted: 15 Aug 2015 Last revised: 30 Oct 2018

See all articles by Daniel Aobdia

Daniel Aobdia

Pennsylvania State University - Smeal College of Business

Luminita Enache

University of Calgary; University of Calgary; Dartmouth College - Tuck School of Business

Anup Srivastava

University of Calgary - Haskayne School of Business

Date Written: April 23, 2016

Abstract

By the end of the 20th century, the competitive structure of the public accounting industry evolved into a tight oligopoly. We predict a reversal of this trend, because new issuers of public equity, who steadily replace legacy companies in the set of public companies, display less verifiable assets, more complex accounting estimates, and higher audit risks. Unlike their predecessors, these new issuers appear less and less attractive to Big N auditors. Smaller auditors service the growing market of riskier companies. Given the stickiness of the auditor-client relationships, we predict a trend of deconsolidation in the audit industry.

Keywords: Competitive structure; Public firms; Oligopoly; Big N audit firms; Audit risks; Intangible assets; Financial reporting quality; Audit fees; Audit quality

JEL Classification: M4, M41, M49

Suggested Citation

Aobdia, Daniel and Enache, Luminita and Enache, Luminita and Srivastava, Anup, Will the Auditing Industry Become a Tighter or Looser Oligopoly? (April 23, 2016). Tuck School of Business Working Paper No. 2643862, Available at SSRN: https://ssrn.com/abstract=2643862 or http://dx.doi.org/10.2139/ssrn.2643862

Daniel Aobdia

Pennsylvania State University - Smeal College of Business ( email )

University Park, PA 16802
United States

Luminita Enache

University of Calgary ( email )

Calgary, Alberta
Canada

HOME PAGE: http://haskayne.ucalgary.ca/haskayne_info/profiles/luminita-enache

University of Calgary ( email )

2500 University Drive, NW
Calgary, Alberta T2N 1N4
Canada
T3G3S2 (Fax)

HOME PAGE: http://https://haskayne.ucalgary.ca/haskayne_info/profiles/luminita-enache

Dartmouth College - Tuck School of Business ( email )

Calgary, Alberta
Canada

HOME PAGE: http://haskayne.ucalgary.ca/haskayne_info/profiles/luminita-enache

Anup Srivastava (Contact Author)

University of Calgary - Haskayne School of Business ( email )

2500 University Drive, NW
Calgary, Alberta T2N 1N4
Canada

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