Determinants of audit fees: the importance of litigation, disclosure, and regulatory burdens in audit engagements in 20 countries

Taylor, Mark; Simon, Daniel T.

doi:10.1016/s0020-7063(99)00017-5

Cited by 85 publications

(59 citation statements)

References 13 publications

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“…As larger auditors have valid reputation for higher quality audits, they earn more fee premium over small ones due to brand name reputation. Hence, the above result coincides with prior studies (Francis, 1984;Gul, 1999;Taylor & Simon, 1999) and in particular with Venkataraman et al (2008) stating that both audit quality and audit fees are higher in a higher-litigation regime.…”

Section: Discussion Of Findingssupporting

confidence: 91%

“…Scale economies prevail in the public accounting industry (Banker et al, 2003) and large audit firms earn more fee premium over small ones due to their brand name reputation (Francis, 1984;Gul, 1999;Taylor & Simon, 1999). Further, earlier studies report a positive association between performance of audit firm and auditor size, measured either by number of partners (Rescho, 1987), number of full-time employees (Collins-Dodd et al, 2004) or by market share (Chen et al, 2008).…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 98%

“…To examine the association between auditor quality and performance constitutes the first purpose of this study. over small ones due to their brand name reputation (Francis, 1984;Gul, 1999;Taylor & Simon, 1999). Large audit firms own abundant resources, such as human capital and information technology, with which to upgrade service quality.…”

Section: Introductionmentioning

confidence: 99%

“…Traditionally, the association between auditor size and performance is positive due to existence of scale economies (Christenson & Greene, 1976;Darrough & Heineke, 1978;Gyimah-Brempong, 1987) or brand name reputation (Francis, 1984;Gul, 1999;Taylor & Simon, 1999). To retain existing clients and thus to earn economic quasi-rents in the long run, incumbent auditors have economic incentive to compromise with the clients and issue an unqualified audit report.…”

Section: Introductionmentioning

confidence: 99%

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Direct and Mediating Effects of Auditor Quality on Auditor Size and Performance

Cheng¹,

Chen²,

Chen³

2013

IBR

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In defining audit quality, DeAngelo (1981) assumes no variation in auditor's technical competency in discovering a breach. Instead, we relax this assumption and utilize principal components analysis technique to extract auditor quality from human capital factors of an audit firm. With the auditor quality, this study examines the association between auditor size and performance. In terms of market segment, audit firms are divided into public company audit market firms (PCAMFs) and non-public company audit market firms (NCAMFs). Based on path analysis, we find that auditor size has direct effect on performance and indirect effect through auditor quality. Auditor quality associates with both auditor size and performance positively. In further, auditor size has more contribution to performance of PCAMFs than that of NCAMFs. Auditor quality of PCAMFs explains more variation of financial performance than do NCAMFs. The results indicate that PCAMFs earn more financial performance through the upgrade of auditor quality.

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Section: Discussion Of Findingssupporting

confidence: 91%

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 98%

Section: Introductionmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Direct and Mediating Effects of Auditor Quality on Auditor Size and Performance

Cheng¹,

Chen²,

Chen³

2013

IBR

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“…Among the determinants of audit fee are corporate size (Waresul & Moizer, 1996;Sandra & Patrick, 1993;Kamal & Rana, 2008), status of the audit firm (big 4 or non-big 4) (Waresul & Moizer, 1996;Kamal & Rana, 2008), industry type (Mohd & Takiah, 1993;Kamal & Rana, 2008;Leventis, Hassan & Dedoulis, 2013;Casterella, Desir & Irwin, 2013), degree of corporate complexity (Sandra & Patrick, 1993;Kamal & Rana, 2008;Sundgren & Svanstrom, 2013), perceived risk (Sandra & Patrick, 1993;Mark et al, 2007;Kamal & Rana, 2008;Aswadi et al, 2009;Kim & Fukukawa, 2012), ownership concentration (Aswadi et al, 2009), type of equity ownership (Badertscher et al, 2013) and audit delay (Sandra & Patrick, 1993;Coster, Dahl & Jenson, 2013). In addition, Taylor & Simon (1999) found that higher audit fee is associated to litigation propensity, higher level of disclosure (and stringent regulation while Stanley (2011) finds that audit fees reflects future changes in client earnings. Substantial regulatory changes such as introduction of Sarbanese-Oxly Act also lead to higher audit fees due to increasing compliance costs (Ebrahim, 2010).…”

Section: Literature Review and Hypotheses Developmentmentioning

confidence: 99%

Corporate Governance Structure and Its Relationship with Audit Fee-Evidence from Malaysian Public Listed Companies

Husnin¹,

Nawawi²,

Salin³

2013

ASS

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What is it going to cost? Empirical evidence from a systematic literature review of audit fee determinants

2020

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The audit market is subject to ongoing regulation to ensure or improve the quality of audit services. For this reason, international research on the audit market is highly popular. As part of this discussion, pricing is considered one of the most relevant aspects of audits. However, a remarkable heterogeneity of the control variables used in empirical studies can be observed. Prior meta-analyses on audit fees already summarized and categorized them for audit fee studies covering financial periods until fiscal year 2007. We contribute to the international literature with an up-to date and systematic review approach on audit fee studies published in international relevant scientific journals (JQ3 A + , A, B). In addition to prior reviews and meta-analyses, we finally suggest a standard model for the most important fee drivers that can be used for future audit fee studies. Our unique approach is based on an EBSCO keyword search with a sample of 385 papers published in international relevant scientific journals (JQ3 A + , A, B) and is using a scoring model to assess significance of audit fee control variables. On the one hand, we enrich the literature by a new state of the art paper on pricing within audit firms. On the other hand, we contribute to the international literature on audit markets from a theoretical point of view by deriving a new testable model of audit fee determinants. Therefore, our empirical results provide several fundamental insights that can be used for further empirical and theoretical research on the pricing of audit services. Thus, the results are meaningful not only for researchers within the field of auditing but also for experts in management, pricing or European legislature.

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Determinants of audit fees: the importance of litigation, disclosure, and regulatory burdens in audit engagements in 20 countries

Cited by 85 publications

References 13 publications

Direct and Mediating Effects of Auditor Quality on Auditor Size and Performance

Direct and Mediating Effects of Auditor Quality on Auditor Size and Performance

Corporate Governance Structure and Its Relationship with Audit Fee-Evidence from Malaysian Public Listed Companies

What is it going to cost? Empirical evidence from a systematic literature review of audit fee determinants

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