This study examines whether client satisfaction can help explain cross‐sectional variation in Big 6 audit fees paid by Fortune 1000 clients. After controlling for other factors related to audit fees (including audit quality attributes), client satisfaction with the audit team is positively associated with fees. It appears that a dimension of client satisfaction unrelated to audit quality attributes is the factor associated with an audit fee premium. This dimension of satisfaction may reflect other aspects of service quality not documented in the literature, or it may simply enable an auditor to earn economic rents through enhanced bargaining power. Client satisfaction with the audit firm does not appear to be priced in this segment of the audit market.The results are consistent with the view that a Big 6 audit is a service that is differentiable in the eyes of client management, and the results highlight the importance of the audit team composition in allowing a Big 6 audit firm to differentiate the audit product. Also, if auditors are earning local rents due to enhanced satisfaction levels, then a perfect competition model may not be appropriate for the audit services market.
<span>This study examines the importance of certain accounting firm characteristicsreputation, personnel, industry experience, and feeto the selection of audit firms by publicly-traded corporations. Client perceptions of these attributes were assessed to determine: (1) possible longitudinal changes in the relative importance of these attributes to clients selections, and (2) possible concurrent differences in the relative importance of these attributes to two different client strata-large versus small corporations. Using conjoint analysis, interval measures of the relative importance of each firm attribute were determined. The results of this study indicate that large and small corporations have very different relative preferences for characteristics of audit firms. In addition the importance attached to certain attributes of audit firms by large and small clients appears to be stable over time.</span>
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