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On the persistence and dynamics of Big 4 real audit fees: Evidence from the UK
Author(s) -
Kacer Marek,
Peel David A.,
Peel Michael J.,
Wilson Nicholas
Publication year - 2018
Publication title -
journal of business finance and accounting
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.282
H-Index - 77
eISSN - 1468-5957
pISSN - 0306-686X
DOI - 10.1111/jbfa.12310
Subject(s) - audit , persistence (discontinuity) , sample (material) , extant taxon , empirical evidence , accounting , business , panel data , economics , econometrics , large sample , estimator , actuarial science , statistics , mathematics , engineering , philosophy , chemistry , geotechnical engineering , epistemology , chromatography , evolutionary biology , biology
Despite the huge audit pricing literature, there is a dearth of evidence on the temporal dynamics of audit fee adjustments and the persistence of audit fees. Based on a sample of 76,867 panel observations for a sample of UK companies audited by the Big 4 over the period 1998 to 2012, we employ consistent lagged dependent variable panel estimators to provide new evidence on the persistence and dynamics of real Big 4 audit fees. Contrary to extant research, which assumes that audit fees adjust immediately in a single period, our empirical results indicate that Big 4 real audit fees are persistent, being partly dependent on their previous realisations. We conclude that static audit fee models omit a potentially important temporal dimension of audit pricing behaviour and that further research is warranted into dynamic audit fee models across other jurisdictions.