The effect of audit firm size on audit prices

Francis, Jere R.

doi:10.1016/0165-4101(84)90010-7

Cited by 608 publications

(512 citation statements)

References 10 publications

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“…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: 74%

Takeover Premiums and the Perception of Auditor Independence and Reputation

Bugeja¹

2009

SSRN Journal

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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.

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

confidence: 74%

Takeover Premiums and the Perception of Auditor Independence and Reputation

Bugeja¹

2009

SSRN Journal

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“…Litig (prior securities litigation) not studied separately. 5 NegEPS + Simunic (1980), Francis (1984), Craswell and Francis (1999), Whisenant et al (2003), Hay et al (2006) (39 studies). 6 Zquin + Stice (1991), Whisenant et al (2003).…”

mentioning

confidence: 99%

An Analysis of Audit Fees Following the Passage of Sarbanes-Oxley

Griffin

Lont

2007

Asia-Pacific Journal of Accounting & Economics

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This study analyzes audit fees following SOX, in particular, the residual increase in audit fees controlling for those factors predicted to change such fees but for the Act. We find significant relations between residual audit fees and incremental audit risk, audit effort, and auditor changes. These factors are noticeably more influential in the period following SOX that includes the implementation of section 404 on internal control. Our results imply that SOX most likely caused an increase in the auditing profession's share of the risk of defective financial statements and client companies' resources to audit a costlier accounting system. JEL Classifications: K22, L80, M41, M42

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“…Owing to the presence of changing costs, it is logical that various studies have revealed that long-term business relationships are the preference of industries with complex and tailored products or services. Alternatively, in light of the lower audit fees charged by Big 4 audit firms for the auditor scale economies (Francis, 1984) or the lack of differentiation in the audit fees charged by Big 4 and their counterparts (Simunic, 1980) and their presence in GCC market (Binder, 2009), there is a lack of variation in the audit fees paid by auditor as well as non-auditor change companies.…”

Section: Logistic Regression Analysis Resultsmentioning

confidence: 99%

Internal corporate governance mechanisms and audit quality: Evidence from GCC region

Hassan¹,

Aljaaidi²,

Abidin³

et al. 2018

Int. j. adv. appl. sci.

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Using the suggestions of agency theory alone for predicting the auditor change behavior in the context of GCC countries is inappropriate because they were developed in countries with mature market-oriented economies. In this study, we examine the association of board of directors effectiveness (board of directors independence, size, financial expertise, meetings, nationality, international experience and CEO duality) and audit committee effectiveness (audit committee independence, size, financial expertise, meetings, nationality and international experience) with the incidence of auditor change among Gulf Cooperation Council (GCC) public listed companies for the period 2005-2010. We posit that using an integration framework of agency theory, managerial grid theory, and attractionselection-attrition has more explanatory power to predict auditor change behavior in GCC setting, taking into account economic and behavioral issues. The results show that only board of directors' effectiveness is significantly associated with the incidence of auditor change. This study finds out that the economic and the behavioral activities are related to the audit demand in the GCC. Moreover, the study suggests that regulators, especially GCC stock exchanges, should force companies to disclose all relevant information related to auditor change in a transparent and timely manner, and increase law enforcement to enhance good corporate governance practices. For companies, this study proposes that they should put more emphasis on enhancing the role and the quality of the board of directors and audit committee members, as they are involved in the decision of auditor change.

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The effect of audit firm size on audit prices

Cited by 608 publications

References 10 publications

Takeover Premiums and the Perception of Auditor Independence and Reputation

Takeover Premiums and the Perception of Auditor Independence and Reputation

An Analysis of Audit Fees Following the Passage of Sarbanes-Oxley

Internal corporate governance mechanisms and audit quality: Evidence from GCC region

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