What Drives Differences in Audit Pricing around the World?

Abstract

Audit pricing, along with its determinants, forms one of the most extensively investigated areas in audit research. Recent years have seen increasing interest in the macro-level determinants of audit fees related to differences in audit environments around the world. To answer the resultant call for further investigation, we firstly provide a comprehensive synthesis of macro-level determinants that have been considered in empirical cross-country auditing research. Secondly, we provide evidence that audit prices vary substantially across different institutional settings. Thirdly, employing the comprehensive set of country variables identified in our literature review, we examine the relative importance of country factors in accounting for these cross-country differences. We find that economic and regulatory characteristics contribute most to explaining such variations, while the results also demonstrate the sociological environment’s significance. In times when auditing is becoming more globalized, our study should be of interest to a wide range of readers including researchers, practitioners and regulators.

Keywords: auditing, audit fees, literature review, cross-country research

JEL Classification: M40, M42