The Effects of Firm-Wide and Office-Level Industry Expertise on Audit Pricing

Accounting Review - Tập 78 Số 2 - Trang 429-448 - 2003
Andrew Ferguson1, Jere R. Francis2, Donald J. Stokes3
1University of New South Wales
2b University of Missouri–Columbia.
3University of Technology - Sydney#TAB#

Tóm tắt

This study examines the role of auditor industry expertise in the pricing of Big 5 audits in Australia. We test if the audit market prices an auditor's firm-wide industry expertise, or alternatively if the audit market only prices office-level expertise in those specific cities where the auditor is the industry leader. We document that there is an average premium of 24 percent associated with industry expertise when the auditor is both the city-specific industry leader and one of the top two firms nationally in the industry. However, the top two firms nationally do not earn a premium in cities where they are not city leaders. We further document that national leadership rankings are, in fact, driven by the specific offices where accounting firms are city leaders. Thus, the overall evidence supports that the market perception and pricing of industry expertise in Australia is primarily based on office-level industry leadership in city-specific audit markets.

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Accounting Review

Tập 78 Số 2

429-448

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