What Matters in Audit Pricing: Industry Specialization or Overall Market Leadership?

10 Pages Posted: 8 May 2006

See all articles by Andrew Ferguson

Andrew Ferguson

University of Technology, Sydney - Discipline of Accounting; Financial Research Network (FIRN); Centre for International Finance and Regulation (CIFR)

Jere R. Francis

Maastricht University

Donald J. Stokes

Monash University

Abstract

Ferguson et al. (2003) report that audit industry fee premia primarily reside with joint national and city-specific industry leadership as opposed to merely firm-wide (national) industry expertise, suggesting auditor choice among the Big 5 is best conceptualized on joint industry specialization in city-specific markets and nationally. The present study examines whether the prior results could be confounded by the presence of city-specific overall market leadership effects. Our findings reaffirm that joint local and national auditor industry expertise is valued by audit clients. Furthermore, overall city-specific leadership, by itself, also matters in fee determination and results in higher fees, although at a slightly weaker level of statistical significance.

Suggested Citation

Ferguson, Andrew and Francis, Jere R. and Stokes, Donald, What Matters in Audit Pricing: Industry Specialization or Overall Market Leadership?. Accounting and Finance, Vol. 46, No. 1, pp. 97-106, March 2006. Available at SSRN: https://ssrn.com/abstract=889782 or http://dx.doi.org/10.1111/j.1467-629X.2005.00152.x

Andrew Ferguson (Contact Author)

University of Technology, Sydney - Discipline of Accounting ( email )

P.O. Box 123 Broadway
Sydney, NSW 2007
Australia
02 9514 3565 (Phone)
02 9514 3669 (Fax)

Financial Research Network (FIRN)

C/- University of Queensland Business School
St Lucia, 4071 Brisbane
Queensland
Australia

HOME PAGE: http://www.firn.org.au

Centre for International Finance and Regulation (CIFR) ( email )

Level 7, UNSW CBD Campus
1 O'Connell Street
Sydney, NSW 2000
Australia

Jere R. Francis

Maastricht University ( email )

P.O. Box 616
Maastricht, 6200 MD
Netherlands

Donald Stokes

Monash University ( email )

Department of Accounting and Finance
P O Box 197
Caulfield East, Victoria 3145
Australia

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