On the Persistence and Dynamics of Big 4 Real Audit Fees: Evidence from the UK

14 Pages Posted: 7 May 2018

See all articles by Marek Kacer

Marek Kacer

University of Leeds - Credit Management Research Centre (CMRC); Leeds University Business School (LUBS) - Accounting and Finance Division; University of Economics in Bratislava

David A. Peel

Lancaster University

Michael J. Peel

Cardiff University - Cardiff Business School

Nick Wilson

University of Leeds - Credit Management Research Centre; Leeds University Business School

Multiple version iconThere are 2 versions of this paper

Date Written: May/June 2018

Abstract

Despite the huge audit pricing literature, there is a dearth of evidence on the temporal dynamics of audit fee adjustments and the persistence of audit fees. Based on a sample of 76,867 panel observations for a sample of UK companies audited by the Big 4 over the period 1998 to 2012, we employ consistent lagged dependent variable panel estimators to provide new evidence on the persistence and dynamics of real Big 4 audit fees. Contrary to extant research, which assumes that audit fees adjust immediately in a single period, our empirical results indicate that Big 4 real audit fees are persistent, being partly dependent on their previous realisations. We conclude that static audit fee models omit a potentially important temporal dimension of audit pricing behaviour and that further research is warranted into dynamic audit fee models across other jurisdictions.

Keywords: adjustment speed, Big 4, dynamic panel estimates, listed and unlisted companies, partial adjustment, persistence, real audit fees

Suggested Citation

Kacer, Marek and Peel, David A. and Peel, Michael J. and Wilson, Nicholas, On the Persistence and Dynamics of Big 4 Real Audit Fees: Evidence from the UK (May/June 2018). Journal of Business Finance & Accounting, Vol. 45, Issue 5-6, pp. 714-727, 2018, Available at SSRN: https://ssrn.com/abstract=3173370 or http://dx.doi.org/10.1111/jbfa.12310

Marek Kacer (Contact Author)

University of Leeds - Credit Management Research Centre (CMRC) ( email )

Leeds, LS2 9JT
United Kingdom

Leeds University Business School (LUBS) - Accounting and Finance Division ( email )

Leeds LS2 9JT
United Kingdom

University of Economics in Bratislava ( email )

Dolnozemsk√° cesta 1
Bratislava, 852 35
Slovakia

David A. Peel

Lancaster University

Lancaster LA1 4YX
United Kingdom

Michael J. Peel

Cardiff University - Cardiff Business School ( email )

Cardiff
United Kingdom

Nicholas Wilson

University of Leeds - Credit Management Research Centre ( email )

Leeds LS2 9JT
United Kingdom
+44 (0)113 343 4472 (Phone)

Leeds University Business School ( email )

Leeds LS2 9JT
United Kingdom
+44 (0)113 343 4472 (Phone)

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