The Effect of Partner Digitalization Expertise on Audit Fees

49 Pages Posted: 8 May 2020

See all articles by Arpine Maghakyan

Arpine Maghakyan

Aalto University - School of Business

Henry Jarva

Aalto University - School of Business

Lasse Niemi

Aalto University - School of Business

Jukka Sihvonen

Aalto University

Date Written: April 13, 2020

Abstract

We document a fee premium for audit partners who have gained expertise in digitalization by specializing in highly or similarly digitalized clients. Overall, our evidence is consistent with the view that the digitalization of a client’s business and information systems provides audit partners an opportunity to differentiate themselves as experts in digitalization and earn a fee premium. In our sample of listed and private firms in Finland, we find a fee premium of 13–35%. For U.S.-listed companies, we document a fee premium of 63–65%. This study contributes to archival research on auditor expertise and audit pricing by showing that expertise in digitalization is separate from industry-specific and generic knowledge accumulated by years in the profession, enhancing our understanding of the nature of auditing in the current audit environment.

Keywords: audit partner expertise, auditor specialization, audit fees, digitalization, business automation

JEL Classification: L84, M40, M42

Suggested Citation

Maghakyan, Arpine and Jarva, Henry and Niemi, Lasse and Sihvonen, Jukka, The Effect of Partner Digitalization Expertise on Audit Fees (April 13, 2020). Available at SSRN: https://ssrn.com/abstract=3575360 or http://dx.doi.org/10.2139/ssrn.3575360

Arpine Maghakyan

Aalto University - School of Business ( email )

Helsinki
Finland

Henry Jarva

Aalto University - School of Business ( email )

P.O. Box 21210
AALTO, FI-00076
Finland

Lasse Niemi (Contact Author)

Aalto University - School of Business ( email )

P.O. Box 21210
Helsinki, 00101
Finland

Jukka Sihvonen

Aalto University ( email )

P.O. Box 21210
Helsinki, 00101
Finland

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