The Effect of Accounting Firms Size on Audit Fees

Abstract

Abstract-The study of audit fees is one of the most important issues in auditing market. Audit fees are the "economic bridge" between listed companies and accounting firms. Reasonable audit fees can improve the audit quality. This paper examines the effect of accounting firms on audit fees, and discusses whether there are significant differences in audit fees among different size of accounting firms. Through studying the audit fees of A-share listed companies of China from 2013 to 2015, we find that compared with the local accounting firms, the big four accounting firms have obtained a significant audit fees premium. And compared with the small and medium local accounting firms, the large local accounting firms have also obtained a significant audit fees premium.

Annual report inquiry letters, disclosure of key audit matters and audit fees: Evidence from Chinese A-share listed companies

“…The heterogeneity testing results show that the aforementioned relationships are more significant for companies audited by non-Big-Four firms. Large international accounting firms often have better brand reputations and maintain higher audit quality to safeguard their reputations and client relationships (Wang & Zhou, 2018;Nurjanah & Diyanty, 2019;Lento & Yeung, 2023). Their business stability is higher and they are less affected by external factors, resulting in smaller fee fluctuations.…”