Search results

While concentration measures are a good indicator of market structure, the link with competitiveness is more complex than often assumed. In particular, the modern theory of industrial organisation makes no clear statement regarding the impact of concentration on competition ‐ the focus of this paper is concentration and no inferences are made about competitive aspects of the market. The extent and nature of concentration within the UK listed company audit market as at April, 2002 and, pro forma, after the collapse of Andersen is documented and analysed in detail (by firm, market segment and industry sector). The largest four firms held 90 per cent of the market (based on audit fees) in 2002, rising to 96 per cent with the demise of Andersen. A single firm, Pricewaterhouse‐Coopers, held 70 per cent or more of the share of six out of 38 industry sectors, with a share of 50 per cent up to 70 per cent in a further seven sectors. The provision of non‐audit services (NAS) by incumbent auditors is also considered. As at April 2002, the average ratio of non‐audit fees (paid to auditor) to audit fees was 208 per cent, and exceeded 300 per cent in seven sectors. It is likely, however, that disposals by firms of their management consultancy and outsource firms, combined with the impact of the Smith Report on audit committees will serve to reduce these ratios. Another finding is that audit firms with expertise in a particular sector appeared to earn significantly higher nonaudit fees from their audit clients in that sector. The paper thus provides a solid empirical basis for debate. The subsequent discussion considers the implications for companies and audit firms of the high level of concentration in the current regulatory climate, where no direct regulatory intervention is planned.

The purpose of this paper is to examine how the concentration of a specific customer type – governmental customer, affects the pricing of audit services in the USA.

This paper applies a standard audit pricing model by regressing audit fees on governmental customer concentration and other common determinants of audit fees. This paper also adopts an instrumental variable approach and performs propensity-score matched sample analyzes to mitigate the potential endogeneity problem.

Using data from major customer disclosures of US publicly listed firms from 2000 to 2014, this paper finds that governmental customer concentration is positively associated with audit fees, suggesting that a higher level of governmental customer concentration increases a firm’s audit risks and audit effort. In addition, this paper performs cross-sectional analyzes and show that the association between governmental customer concentration and audit fees is more pronounced for firms with weak internal governance, weak external monitoring and high financial risks.

This paper furthers the understanding of the interactive relationships in supply chain systems and adds new evidence to the literature on customer concentration. Prior studies on customer concentration typically treat all customer types in a uniform manner. To the knowledge, this is the first study that separates governmental customers from other types of customers in an audit pricing setting. The findings highlight the importance of examining governmental customer concentration when assessing a firm’s audit risks and audit fees.

The study examines the changes in audit market concentration, auditor choice and audit quality in Russia following International Financial Reporting Standards (IFRS) adoption. Scholars have called for further examination of the effects of IFRS adoption on auditors, with an emphasis on the importance of analyzing emerging markets that are characterized by enforcement challenges and lack of proper infrastructure. It focuses on a unique feature of Russian companies – dual audits under Russian Accounting Standards (RAS) and IFRS – and investigates changes in audit concentration and audit quality for the two audit markets.

The authors rely on the audited financial statements of Russian public companies and perform pre-/post-IFRS adoption estimation using a logit regression to ascertain whether public firms change auditors from local firms with limited IFRS expertise to those with global reputation, namely Big 4 audit firms. Further, they examine whether the change in audit market concentration post-2012 affects audit quality as proxied by companies' propensity to receive a modified audit opinion and discretionary accruals. Auditor attributes were hand-collected from audited financial statements and matched with financial variables from Datastream.

The IFRS audit market was dominated by the Big 4 audit firms prior to 2012, and there is strong evidence that audit market share (concentration) increases for IFRS reports but not for RAS reports. In addition, companies are more likely to choose a Big 4 audit firm for an RAS audit, conditional upon a Big 4 firm conducting the IFRS audit. The authors do not find evidence of decrease in the probability of audit firms issuing a modified audit opinion under either RAS or IFRS, indicating that, in the Russian setting, increased auditor concentration post-IFRS adoption does not lead to enhanced risk or decline in audit quality. Moreover, they find that discretionary accruals decline post-2012. Overall, the findings indicate that the concern of global regulators regarding audit market concentration is not justified.

The Russian reporting environment is unique and generally characterized by significant agency problems, and the study’s estimation sample is not large, compared to prior studies conducted predominantly in Western jurisdictions. Nevertheless, the authors shed light on the audit concentration phenomenon within emerging markets, for which empirical evidence is scarce. Future research could explore the impact of other capital market events and exogenous shocks, not limited to IFRS adoption, on the characteristics of Russia's audit market.

The IFRS reporting regime is commonly associated with enhanced reporting quality and improved information transparency among public companies. Yet, impairment of audit quality as a result of IFRS-driven increase in audit market share of Big 4 can potentially negate these capital market effects. This study shows that the concerns of global regulators are not valid and that audit quality does not change with increased share of Big 4 post-IFRS adoption.

Dual audits, whereby companies must prepare two sets of financial statements per the IFRS mandate, are not unique to Russia, and the evidence of IFRS reporting on the structural changes in the audit market and implications for audit quality under a dual regime is scarce. Accordingly, the study's findings are important and timely and are expected to aid regulators of countries that have announced or are contemplating the adoption of IFRS for public reporting purposes.

The purpose of this paper is to examine the direct and interactive effects of audit service quality and audit market concentration on performance of public accounting firms in Taiwan.

Empirical data of this study come from registered public accounting firms in Taiwan, an industrial data. From the perspective of industrial economics and based on the structure-conduct-performance paradigm (Cowling and Waterson, 1976), this study use OLS to test the linear regression equation.

Empirical results indicate that both audit service quality and audit market concentration have positive effects on performance. The interaction terms between audit service quality and audit market concentration are positively related to performance.

This documents that human capital is the core resource in public accounting firms which could enhance performance through higher audit service quality under intense market competition. Specifically, facing increasingly competitive audit market, public accounting firms response to the hostile situation by employing auditors with higher educational level, more work experience, with professional licenses, and taking more continuing professional education.

Few previous researches consider the effects of either market concentration or audit service quality on firm performance. This study simultaneously examines the relation among audit service quality, audit market concentration, and performance of public accounting firms. With the results, this study contributes knowledge to human resource and quality management-related literatures.

This paper aims to assess auditor narcissism’s effect on audit market competition (auditor concentration, clients’ concentration and competitive pressure).

This paper’s method is descriptive-correlational based on published information from listed firms on the Tehran Stock Exchange from 2012 to 2018 using a sample of 188 firms (1,310 observations). The method used for hypothesis testing is linear regression using panel data.

The results show a negative and significant relationship between auditor narcissism and audit market competition and its indices, including auditor concentration, clients’ concentration and competitive pressure. Moreover, a positive and significant relationship was observed between audit quality and audit market competition and its indices, including auditor concentration, client concentration and competitive pressure.

To analyzes competition indices in the audit market (auditor concentration, clients’ concentration and competitive pressure). The variable is assessed once more using the exploratory factor analysis of the so-called three variables single variable, named audit market competition. So the central question of the study is investigated within a broader sense. Moreover, as the present study is carried out in the emergent financial markets with extremely competitive audit markets to figure out the effect of auditors’ intrinsic characteristics on such markets’ competitiveness, it can provide useful information in this field.

While recently introduced EU regulation on the statutory audit of public interest entities (PIEs) aims to improve audit competition and quality, its success and impact depends on the definition of a PIE applied across the various EU Member States. In the UK, even though little is known about their auditing choices, these changes will not apply to most private companies despite their importance to the wider economy. The purpose of this paper is to provide an in-depth analysis of the private company audit market and examine the lobbying behaviour of the accounting profession around the definition of a PIE in the UK.

Using a large panel of independent private company audits in the UK and a textual analysis of submitted comment letters to a government consultation on the new regulation, this paper presents a comprehensive analysis of the audit market for private companies by measuring supplier concentration using four different measures of market share, and of the lobbying behaviour of the accounting profession.

There are two main findings. First, the private company audit market is characterised by low auditor switching rates along with a tight oligopoly of the largest independent private company audits maintained by the Big Four audit firms. Second, the lobbying behaviour of accounting and audit firms sought, and succeeded, to limit the scope of the definition of a PIE in the UK, consistent with the theoretical predictions of monopoly capitalism and the theory of professions.

The paper shows that the definition and scope of a PIE needs revisiting both within the UK and across all EU Member States, with a view to including more of these economically important private companies and highlights the policy challenge of increasing competition and choice in a concentrated audit market.

The purpose of this paper is to examine the relationship between market structure, competition and pricing in the UK accounting services market. This association is important because mergers amongst the leading firms and the collapse of Arthur Andersen have reduced the number of international accounting firms to four.

The paper examines concentration ratios (CR) and the fees charged by accounting firms. The data used encompass the period when the number of leading suppliers fell from eight to four.

FTSE100 consultancy fees increased rapidly in the 1990s. Independence concerns, corporate scandals and additional legislation contributed to a sharp increase in audit fees and a significant decrease in consultancy fees since the turn of the century. The international accounting firms responded to saturation of the FTSE100 market by targeting the small and medium‐sized client sectors as avenues for further growth. The audit market is competitive at the initial tender stage but concentration has allowed firms to significantly increase audit fees on repeat engagements.

A number of theoretical and empirical limitations are acknowledged that could further increase the statistical power of the tests.

The study should be of interest to regulatory bodies, auditors, audit clients and academics.

This paper fills a gap in the literature regarding the evolution of CRs and accounting service fees over a significant time frame.

The purpose of this paper is to analyse whether the major international audit firms reach collusive agreements in Spain, in order to exercise market power and impose higher prices than those of competitors. According to the traditional theory of oligopoly, the ability to achieve these agreements is dependent primarily on the high level of market concentration, so that multiple studies have analysed the relationship between concentration and prices. However, the concentration has serious limitations to infer collusion and therefore the exercise of market power (Dedman and Lennox, 2009).

Based on an alternative current of the theory of industrial organisation, the authors use measures of industrial mobility as a measure of collusion or rivalry of firms in oligopolistic markets.

The results reveal that international audit firms do not reach collusive agreements to limit competition between them.

According to the empirical evidence obtained, the measures taken by the regulatory bodies to avoid market concentration would not be necessary or efficient and they would have significant costs for the audit market (GAO, 2003, 2008; FRC, 2009; European Commission, 2010; Competition Commission, 2013).

To the authors’ knowledge, this is the first study to introduce mobility measures to explain market collusion and the exercise of market power in the audit market.

El objetivo de este trabajo es analizar si las Grandes Firmas Internacionales de auditoría alcanzan acuerdos colusivos en España con la finalidad de ejercer poder de mercado e imponer precios superiores a los de los competidores. Según la teoría tradicional del oligopolio, la capacidad para alcanzar estos acuerdos se hace depender fundamentalmente del alto nivel de concentración del mercado, por lo que múltiples estudios han analizado la relación entre concentración y precios. Sin embargo, la concentración presenta serias limitaciones para inferir la colusión y, por tanto, el ejercicio del poder de mercado (Dedman y Lennox, 2009).

Basándonos en una corriente alternativa de la teoría de la organización industrial, utilizamos medidas de movilidad industrial como medida de la colusión o rivalidad de las empresas en mercados oligopolistas.

Nuestros resultados revelan que las firmas internacionales de auditoría no alcanzan acuerdos colusivos para limitar la competencia entre ellas.

Según la evidencia empírica que obtenemos, las medidas adoptadas por los organismos reguladores con la finalidad de desconcentrar el mercado, las cuales presentan importantes costes para el mercado de auditoría, no resultarían ni necesarias ni eficientes (GAO, 2003, 2008; FRC, 2009; Comisión Europea, 2010; Competition Commission, 2013).

Hasta donde conocemos, éste es el primer estudio que introduce medidas de movilidad del mercado para explicar la colusión y el ejercicio del poder de mercado en el mercado de auditoría.

The French law uses joint‐auditing as an audit quality device. This regulation also indirectly preserves market competition by reducing the domination of the large audit firms. However, concerns emerge about the effects of recent auditor mergers on the effectiveness of joint‐auditing: the reduced number of audit suppliers may favour the development of too frequent joint‐auditing collaborations, causing routine cross‐reviews and interdependencies between co‐auditors. This study aims to address this issue.

The market shares, individual performance, and joint‐audit interconnections (attraction‐repulsion indices) of the main audit networks in France are investigated for the year 1997 and again for the year 2003.

Despite the concentration of the audit market for listed companies globally, descriptive market analyses suggest that competition in the audit market has not decreased: the PricewaterhouseCoopers merger in 1998 did not produce any gain in market share to the newly‐formed network; the French member of Arthur Andersen suffered an effective erosion of its audit portfolio resulting from the infamous Enron case; and some national audit networks have maintained significant market positions. Contrary to expectations, the increased concentration did not result in abnormally frequent collaborations between the main audit firms.

The joint‐auditing interconnections are based on the number of common audit clients, and this approach does not take into account the different sizes of the auditees.

This paper is an original approach of auditor concentration in a joint‐auditing environment. To regulators, the results of this study suggest that joint‐auditing can be utilised as a mechanism to preserve market competition and thus potentially maintaining audit quality.

The purpose of this paper is to evaluate the effect between audit quality and risk taking on value creation.

Population under study is companies on the Jakarta Stock Exchange from 2004 to 2015. Considering the limitations, 145 companies studied in this research, which made a sample containing 1,740 company-years. This study is based on the panel data and multivariate regression method. This research uses fixed and random effects to estimate the regression. In this paper, five components of audit quality, including auditor specialization, tenure, audit firm size, ownership concentration and the percentage of unbounded members of the board, are studied.

The results of this study indicate that among these five components as well as the risk factor, only tenure and ownership concentration have a significant effect on value creation of companies. In other words, both ownership concentration and tenure are positively effective in value creation and other variables have no significant effect on value creation. Besides, none of them could affect the risk taking on value creation.

The outcomes of the current study help audit market and capital market in developing nations.