Auditor Choice and Audit Fee Determinants

Thornton, Daniel B.; Moore, Giora

doi:10.1111/j.1468-5957.1993.tb00259.x

Cited by 36 publications

(19 citation statements)

References 18 publications

Supporting

Mentioning

Contrasting

Unclassified

Order By: Relevance

“…As a consequence, they propose that riskier firms will choose higher-quality audit firms because the incremental value of an audit report provided by a higher-quality audit firm increases in the riskiness of the finn. In contrast, Thornton and Moore (1992) assume that the fee market does not reward intermediaries for taking such risks. Thus, their analytical results suggest that riskier firms will choose lower-quality audit firms since the incremental benefit of a higher-quality audit firm decreases in the riskiness of the firm.…”

Section: Previous Researchmentioning

confidence: 99%

A Note on the Association between Audit Firm Size and Audit Quality*

Davidson

Neu

1993

Contemporary Accting Res

165

View full text Add to dashboard Cite

Abstract. This study proposes that comparison of management earnings forecasts with audited, reported earnings provides an approach to the measurement of audit quality. Assuming that managers have incentives to minimize the difference between forecasted and reported income, higher-quality audit firms will tend to be associated with larger forecast errors. Therefore if, as previous literature suggests, larger auditing firms provide higher-quality audits than do smaller auditing firms, larger auditing firms will tend to be associated with larger forecast errors, all else being equal. Data from the Toronto Stock Exchange are used to examine this p'Oposition. After controlling for client characteristics such as risk, the results indicate that larger auditing firms tend to be associated with larger forecast errors consistent with the proposition that, other things being equal, larger auditing firms provide higher-quality audits than do small auditing firms.R^sumi. Les auteurs proposent une technique de mesure de la qualite de la verification qui consiste a comparer les provisions de la direction relatives aux b^n^fices et les benefices declares qui ont ^16 verifies. Si Ton suppose que les gestionnaires ont interSt a minimiser l'^cart entre les benefices {B'VUS et les bOn^fices d^clar^s, les verificateurs de haut calibre auront tendance ^ Stre associ^s a des erreurs previsionnelles plus importantes. Par consequent, si, comme l'ont suggOre les etudes antOrieures, les cabinets d'experts-comptables importants offrent des services de verification de meilleure quality que les cabinets d'experts-comptables de taille plus modeste, les cabinets d'experts-comptables importants auront tendance a Stre associ^s aux erreurs previsionnelles plus grandes, toutes choses etant egaies. Les auteurs utilisent les donnees de la Bourse de Toronto pour verifier cette affirmation. Une fois contrdlees Ies caracteristiques du client telles que le risque, les resultats indiquent que les cabinets d'experts-comptables de grande taille tendent a Itre associ^s aux erreurs previsionnelles plus importantes, ce qui confirme l'hypothese vouiant que, toutes choses etant egaies, fes cabinets d'experts-comptables de grande taille offrent des services de verification de meilleure qualite que les cabinets d'experLs-comptables de taiile plus petite.

show abstract

Section: Previous Researchmentioning

confidence: 99%

A Note on the Association between Audit Firm Size and Audit Quality*

Davidson

Neu

1993

Contemporary Accting Res

165

View full text Add to dashboard Cite

show abstract

“…It revealed that a wide range of factors which cause the variation of audit fees are likely to be classified into five general categories; that is, audit workload, complexity, risks, auditee's inputs and the size of accounting firm. Thornton and Moore (1993) provided a similar classification in which the audit fee determinants were divided into four groups; client company size, weakness of internal control, business risk and audit complexity.…”

Section: Introductionmentioning

confidence: 99%

The Determinants of Audit Fees: Australian Perspective

Zhang

Myrteza

1996

Asian Review of Accounting

View full text Add to dashboard Cite

In line with the guidelines suggested by the Australian Society of Certified Practising Accountants, a sample of 243 Australian listed companies was used in this study to investigate if the factors of auditee size, audit complexity, audit time, audit quality and audit risk could explain the variation of auditor fees. The model achieved a relatively high level of goodness-of-fit (adjusted R equals to 0.7631) and overall significance at p < 0.001 (F-ratio). Like most prior studies, auditee size appeared to be the most important factor explaining audit fee payments. However, adding a non-audit fee variable provided little incremental explanatory power to the audit pricing model, indicating that providing audit and non-audit services jointly may not create a "knowledge spillover" which is hypothesised to lead to economic rents.

show abstract

“…Starting with Simunic (1980) there has been much debate on whether some auditors earn premium fees and what the source of the premium is (Thornton and Moore, 1993). By appealing to the economic theory of quality differentiation, higher fees (to some auditors) are consistent with a quality premium and represent a return to an auditor's costly investment in quality.…”

Section: Introductionmentioning

confidence: 98%

Audit pricing following mergers of accounting practices: evidence from Hong Kong

Firth¹,

Lau

2004

Accounting and Business Research

View full text Add to dashboard Cite

This study investigates what happens to audit fees after audit firms merge. In particular, we examine whether pre-merger fee premiums of the strong brand name auditor spread to the other auditor. Using data from Hong Kong we analyse the 1997 merger between Kwan Wong Tan & Fong (KWTF) and Deloitte Touche & Tohmatsu (DTT) to become DTT, and the 1998 merger between Coopers & Lybrand (CL) and Price Waterhouse (PW) to form PricewaterhouseCoopers (PwC). We find that DTT audit fees are 55% higher than KWTF prior to the merger and this premium falls to 41% in 1998 and to 34% in 1999. However, we find no increase in audit fees for incumbent property company clients, a sector where KWTF is the leading supplier. Prior to its merger. PW earned audit fees 16.4% higher than those earned by CL and the premium is even larger for clients in the consolidated enterprises and property companies sectors. We find no change in audit fees after the PwC merger. This result suggests that the PwC merger is a response to increased competition and clients are unwilling to pay higher fees for within-Big 5 re-branding.

show abstract

Auditor Choice and Audit Fee Determinants

Cited by 36 publications

References 18 publications

A Note on the Association between Audit Firm Size and Audit Quality*

A Note on the Association between Audit Firm Size and Audit Quality*

The Determinants of Audit Fees: Australian Perspective

Audit pricing following mergers of accounting practices: evidence from Hong Kong

Contact Info

Product

Resources

About