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City-level auditor industry specialization, economies of scale, and audit pricing
journal contribution
posted on 2012-07-01, 00:00 authored by Simon FungSimon Fung, Ferdinand GulFerdinand Gul, J KrishnanWe examine the effects of city-level auditor industry specialization and scale economies on audit pricing in the United States. Using a sample of Big N clients for the 2000-2007 period, and a scale measure based on percentile rankings of the number of audit clients at the city-industry level, we document significant specialization premiums and scale discounts in both the pre- and post-Sarbanes-Oxley Act (SOX) periods. However, the effects of industry specialization and scale economies on audit pricing are highly interactive. The negative effect of city-industry scale on audit fees obtains only for clients of specialist auditors. By contrast, clients of non-specialist auditors obtain scale discounts only when they enjoy strong bargaining power, suggesting that auditors are "forced" to pass on scale economies to clients with greater bargaining power.
History
Journal
Accounting reviewVolume
87Issue
4Pagination
1281 - 1307Publisher
American Accounting AssociationLocation
Ann Arbor, Mich.Publisher DOI
ISSN
1558-7967Language
engPublication classification
C1.1 Refereed article in a scholarly journal; C Journal articleCopyright notice
2012, American Accounting AssociationUsage metrics
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