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The impact of market inequality on audit price

Kimberly Dunn (School of Accounting, Florida Atlantic University Barry Kaye College of Business, Boca Raton, Florida, USA)
Mark Kohlbeck (Florida Atlantic University, Boca Raton, Florida, USA)
Brian Mayhew (Department of Accounting, University of Wisconsin Colleges, Madison, Wisconsin, USA)

Managerial Auditing Journal

ISSN: 0268-6902

Article publication date: 1 October 2019

Issue publication date: 7 October 2019




This paper aims to evaluate policymakers’ concerns about the lack of competition in highly concentrated markets for public company audits by examining the association between audit fees and the inequality of Big 4 market shares at both the USA national-industry and city-industry levels.


Using publicly available data, this paper uses regression analysis to examine publicly available data to test research hypotheses related to the association between audit market inequalities and audit fees at both the USA national-industry and city-industry levels.


The findings support a U-shaped association between national-industry inequality and audit fees. As inequality initially increases, fees decrease; however, as inequality becomes increasingly large fees increase. The city-industry level analysis shows the opposite pattern. The results are consistent with capacity constraints at the national-industry level that are less binding at the city-industry level.

Research limitations/implications

This study provides evidence that market inequality has a non-linear association with audit price and contributes to the limited findings in industrial organization research on the importance of market share inequality in highly concentrated markets.


This study provides new insights into the growing body of research on audit market structure by documenting that national-industry and city-industry analysis provides different insights into the market structure. In addition, the sample period for this study (2004-2017) addresses the General Accounting Office (GAO) concern about the lack of a stable audit market in the period it examined (GAO, 2008, p. 94) and finds evidence of market structure effects not present in the earlier GAO studies (GAO, 2003, 2008).



Dunn, K., Kohlbeck, M. and Mayhew, B. (2019), "The impact of market inequality on audit price", Managerial Auditing Journal, Vol. 34 No. 9, pp. 1149-1172.



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