Audit Prices, Product Differentiation, and Scale Economies: Further Evidence from the Australian Market

Francis, Jere R.; Stokes, Donald J.

doi:10.2307/2491141

Cited by 295 publications

(244 citation statements)

References 6 publications

Supporting

Mentioning

212

Contrasting

Unclassified

Order By: Relevance

“…This result is coherent with the results of the studies (Yoke-Kai Chan andTerry S. Walter, 1996, Francis andStokes, 1986;Nelson et al, 1988 andKam-Wah Lai, 2013) which showed that the largest audit firms are more likely to qualify an audit report to protect their reputation, and consequently positively influence the probability of having an audit opinion with reservations.…”

Section: Identity Of the Auditorsupporting

confidence: 89%

See 1 more Smart Citation

Determinants of Audit Opinion after the Scandals of Enron: Empirical Validation in the French Context

Soltani¹

2016

IJBM

View full text Add to dashboard Cite

This study examines the effect of regulatory changes on audit quality in the French context. The evaluation of the risks and the anomalies carried out by the auditors brings them control relating to the financial statements of the company in order to express an opinion on the effectiveness, the regularity, the sincerity and the faithful image of these documents, in a large complexity of the organizations the objective of this research consists in studying the effect of the evolutions of the regulation as regards legal audit on the estimate of the probability of having an opinion of audit with reserve which reinforces the independence of the auditor.A list of hypothesis related to the approached problems is proposed followed by an overview of the different theoretical propositions which are in place. From a sample of French companies in the SBF 250 over the period 2002-2011, the results show that the analysis of the conditions of receiving a qualified audit opinion is determined by: the variables of the financial health of the company, the inventory receivables which indicate the complexity of the audited firm and the characteristics of the audit.

show abstract

Section: Identity Of the Auditorsupporting

confidence: 89%

“…Yoke-Kai Chan and Terry S. Walter (1996) add that the large bureaus of audit approve a higher level of checking compared to the small (Francis & Stokes, 1986;Nelson et al, 1988). These considerations are used to think that the large companies are more likely to qualify a report of audit to protect their reputation.…”

Section: Wwwccsenetorg/ijbmmentioning

confidence: 99%

Determinants of Audit Opinion after the Scandals of Enron: Empirical Validation in the French Context

Soltani¹

2016

IJBM

View full text Add to dashboard Cite

show abstract

“…Size may also be a good proxy for quality because large auditors have an incentive to protect their investment in brandname and reputation (Klein andLeffler, 1981 andShapiro, 1983). The findings of prior research (Francis, 1984;Francis and Stokes, 1986;Palmrose, 1986;Simon, 1987 andGist, 1992) of an audit fee premium being paid to large auditors is typically interpreted as being consistent with such auditors providing a higher quality product and earning a return on their brandname investment.…”

Section: Takeover Premiums and The Role Of The Target Firm Auditormentioning

confidence: 92%

Takeover Premiums and the Perception of Auditor Independence and Reputation

Bugeja¹

2009

SSRN Journal

View full text Add to dashboard Cite

This study investigates if there is a positive association between takeover premiums and the bidder's perception of target firm auditor reputation and independence. Using auditor size as a proxy for auditor reputation, the results indicate that target shareholders receive a higher takeover premium when a Big 4 auditor audits the target firm in the year prior to the takeover announcement. This result is only significant however in the period prior to the highly publicised audit failures. The impact of perceived auditor independence on takeover premiums is studied using the levels and size of non-audit service (NAS) fees provided by the target firm auditor. Using three proxies for auditor independence, the results do not show an association between perceived auditor independence and takeover premiums. This finding is robust to partitioning the sample by auditor size, takeover hostility and splitting the sample into takeovers pre-and post-the corporate scandals that occurred in 2002.

show abstract

“…Results, while inconclusive, are suggestive of the existence of a fee premium in the case of small auditees, but not large auditees (e.g., Palmrose, 1986a;Francis and Simon, 1987;Taffler and Ramalinggam, 1982;and Francis and Stokes, 1986). This premium is generally attributed to the existence of differentiated audit services, consistent with the predictions of DeAngelo (1981a).…”

Section: Prior Literaturementioning

confidence: 99%

The determinants of audit fees—evidence from the voluntary sector

Beattie

Goodacre

Pratt

et al. 2001

Accounting and Business Research

View full text Add to dashboard Cite

Given the growing demand for accountability in the public sector, there is a need to begin to investigate audit pricing issues in markets within this sector. This study makes three principal contributions. First, it develops and estimates, for the first time, a model of audit fee determinants relevant to the charity sector. The model is based on 210 of the top 500 UK charities with average incoming resources of £27 million. As in previous private sector company studies, size, organisational complexity and audit firm location are the major determinants. A positive association between audit fees and fees for non-audit services is also observed. Charity sector factors of empirical significance include the fundamental nature of the charity (i.e., predominantly grant-making or fund-raising), the importance of trading as a source of charity income and the charity's activity. Separate models are developed for grant-making and fund-raising charities, the results reflecting the relative complexity of the audit of fund-raising charities.Second, the lower auditor concentration in the charity sector market, compared to the private sector market, permits a more powerful test of whether large firms and/or auditor expertise are rewarded with a fee premium. The results show that Big 6 audit firms receive higher audit fees (18.5%, on average) than non-Big 6 firms for audits of fund-raising charities. There is also evidence that non-Big 6 audit firms with expertise in the sector are rewarded with a fee premium over other non-Big 6 firms, again in the more complex audit environment of fund-raising charities.Finally, the study demonstrates that the charity audit fee rate is significantly lower than that of private sector companies; in fact it is approximately half. Further research that discriminates between alternative explanations of this differential is called for. A change in the reporting of charity audit fees is proposed to reflect any element of 'charitable giving' by the audit firm.

show abstract

Audit Prices, Product Differentiation, and Scale Economies: Further Evidence from the Australian Market

Cited by 295 publications

References 6 publications

Determinants of Audit Opinion after the Scandals of Enron: Empirical Validation in the French Context

Determinants of Audit Opinion after the Scandals of Enron: Empirical Validation in the French Context

Takeover Premiums and the Perception of Auditor Independence and Reputation

The determinants of audit fees—evidence from the voluntary sector

Contact Info

Product

Resources

About