The effects of firm-wide and office-level industry expertise on audit pricing

Publisher:
American Accounting Association
Publication Type:
Journal Article
Citation:
The Accounting Review, 2003, 78 (2), pp. 429 - 448
Issue Date:
2003-01
Full metadata record
Files in This Item:
Filename Description Size
Thumbnail2003000497.pdf1.25 MB
Adobe PDF
This study examines the role of auditor industry expertise in the pricing of Big 5 audits in Australia. We test if the audit market prices an auditor's firm-wide industry expertise, or alternatively if the audit market only prices office-level expertise in those specific cities where the auditor is the industry leader. We document that there is an average premium of 24 percent associated with industry expertise when the auditor is both the city-specific industry leader and one of the top two firms nationally in the industry. However, the top two firms nationally do not earn a premium in cities where they are not city leaders. We further document that national leadership rankings are, in fact, driven by the specific offices where accounting firms are city leaders. Thus, the overall evidence supports that the market perception and pricing of industry expertise in Australia is primarily based on office-level industry leadership in city-specific audit markets
Please use this identifier to cite or link to this item: