Audit Fees and Market Segmentation - Further Evidence on How Client Size Matters within the Context of Audit Fee Models

13 Pages Posted: 28 Jun 2004

See all articles by Elizabeth Carson

Elizabeth Carson

University of New South Wales

Neil L. Fargher

Australian National University (ANU)

Dan T. Simon

University of Notre Dame - Department of Accountancy

Mark H. Taylor

University of South Florida, Muma College of Business, Lynn Pippenger School of Accountancy

Abstract

The purpose of this paper is to examine the audit fee premium to the Big 6 brand in the small and large client segments of the market for audit services. We use a sample of Australian fee data for the five-year period 1995 to 1999. We find evidence of price premiums to Big 6 auditors in the small client segment. We do not find evidence of fee premiums in the large client segment. We also present evidence that audit fees are not linearly related to client size as is typically assumed in audit fee models.

Keywords: Audit fees, audit market

JEL Classification: M49

Suggested Citation

Carson, Elizabeth and Fargher, Neil L. and Simon, Daniel T. and Taylor, Mark H., Audit Fees and Market Segmentation - Further Evidence on How Client Size Matters within the Context of Audit Fee Models. International Journal of Auditing, Vol. 8, No. 1, pp. 79-91, March 2004, Available at SSRN: https://ssrn.com/abstract=518771

Elizabeth Carson (Contact Author)

University of New South Wales ( email )

Sydney, NSW 2052
Australia
+612 9385 5822 (Phone)
+612 9385 5925 (Fax)

Neil L. Fargher

Australian National University (ANU) ( email )

Canberra, Australian Capital Territory 2601
Australia

Daniel T. Simon

University of Notre Dame - Department of Accountancy ( email )

Mendoza College of Business
Notre Dame, IN 46556-5646
United States
219-631-8116 (Phone)
219-631-5255 (Fax)

Mark H. Taylor

University of South Florida, Muma College of Business, Lynn Pippenger School of Accountancy ( email )

4202 E. Fowler Avenue
Tampa, FL 33620
United States
(813) 974-6516 (Phone)

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