z-logo
open-access-imgOpen Access
A Retrospective Look at the Effect of Auditor Specialization and Industry Concentration on the Cost of Audit Services
Author(s) -
Jeffrey R. Casterella,
Rosemond Desir,
Gretchen Irwin
Publication year - 2013
Publication title -
accounting and finance research
Language(s) - English
Resource type - Journals
eISSN - 1927-5994
pISSN - 1927-5986
DOI - 10.5430/afr.v2n2p79
Subject(s) - audit , accounting , competition (biology) , business , sample (material) , big four , market competition , accountability , market concentration , market structure , economics , industrial organization , market economy , ecology , chemistry , chromatography , political science , law , biology

The purpose of this paper is to perform a retrospective, pre-merger look at the effect of concentration and specialization on audit fees when there were 6 large accounting firms (i.e. the “Big 6”). The US General Accountability Office (GAO) reviewed the effects of auditor concentration on the market for audit services. The 2008 GAO report includes some discussion of the possibility that one or two of the largest sell off a substantial portion of their business which would revert the Big 4 back to the Big 5 or Big 6. Because of the concern over concentration in the audit market and the future possibility of returning to a market that would consist of more than 4 large accounting firms, we conduct a retrospective look at pricing behavior in the audit market when it was less concentrated.Using a sample of 653 U.S. public companies audited by the Big 6, we find that specialists charged more for their services unless they are in competition with other specialists in concentrated industries.

The content you want is available to Zendy users.

Already have an account? Click here to sign in.
Having issues? You can contact us here