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Demand and Supply of Auditing in IPOs: An Empirical Analysis of the Québec Market
Author(s) -
Bédard Jean,
Coulombe Daniel,
Courteau Lucie
Publication year - 2000
Publication title -
international journal of auditing
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.583
H-Index - 21
eISSN - 1099-1123
pISSN - 1090-6738
DOI - 10.1111/1099-1123.00315
Subject(s) - audit , initial public offering , business , accounting , big four , finance
This study examines the factors affecting the demand for higher‐quality auditors at the time of an initial public offering in a small market characterized by low‐litigation risk, government subsidies for companies going public, and the presence of large non‐Big Six auditors, namely, the Canadian province of Québec. Our results, from an analysis of 212 Québec IPOs between 1983 and 1997, indicate that the choice of an auditor at the time of an IPO is significantly affected by the company's risk, size, and geographical dispersion. They also suggest that the Québec audit market is segmented between three types of service providers: the Big Six, the National firms and the Local firms. Local firms audit small local companies with low risk, National firms audit large local companies with moderate risk, and the Big Six audit large geographically dispersed companies with high risk.