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This paper aims to investigate whether the expected implementation of Section 404(b) of the Sarbanes-Oxley Act (SOX 404(b)) (the integrated audit requirement) caused auditors to discount their audit fees for non-accelerated filers in anticipation of expected increased future economic rents (DeAngelo, 1981) from those clients.

This paper predicts that auditors charged their non-accelerated filer clients lower audit fees during the years 2005-2007 (in anticipation of increased expected future economic rents from the implementation of the SOX 404(b) requirement) compared with the years 2010-2012 (when it had been determined that non-accelerated filers were permanently exempt from complying with SOX 404(b)). The authors use ordinary least squares regression analysis to examine whether audit fees increased significantly for non-accelerated filers after the permanent exemption announcement.

The results show a significant positive association between the exemption announcement and audit fees, supporting the theory that auditors discounted their audit fees for non-accelerated filers in the pre-exemption announcement period. This finding is robust when sensitivity tests are used.

The findings of audit fee discounting literature related to the post-SOX period are mixed. This study adds to this stream of literature by supporting the notion that audit fee discounting is being practiced post-SOX and is a potential unintended consequence of SOX 404 and the exemption. Thus, investors will be interested in the results of this paper when making their investment decisions with regard to non-accelerated filers.

The results of this paper show that, even in the post-SOX environment, auditors will employ the use of audit fee discounting if a change in regulation incentivizes it. This commentary on the present state of the audit pricing market should be of interest to audit pricing policymakers.

This paper is one of the first to study audit fee discounting outside the realm of initial audit engagements.

The purpose of this paper is to examine the impact of auditor switching on audit fee discounting in Iran. The increased competition in the Iranian audit market following audit market liberalization in 2001 has resulted in a rapid increase in auditor switching and reduces the relative bargaining power of auditors compared to the clients. It is expected that auditor switching results in fee discounting because the relative bargaining power of an auditor (client) is likely to be at the minimum (maximum) point during the initial period of engagement. Since the increased bargaining power of a client in initial year seems to be different in the case of different type of auditor switching (from a state auditor to a private and from a private auditor to another), the magnitude of fee discounting is expected to be different.

The objective is tested using a sample of 1,022 firm-year observations between 2001 and 2010. This study applies the multivariate regression model using the first difference specification of audit fee as a dependent variable.

Multivariate analysis reveals that auditor switching results in 14 percent of fee discounting. In addition, the results show that 18 and 13 percent of fees discounting during the initial year of engagement arise from cases of auditor switching involving a change from state auditors to private auditors, and a change from one private auditor to another, respectively. The findings support bargaining power view explanation in relation to audit fees discounting in initial year engagement.

This study is the first to examine the impact of auditor switching (and analyzed different types of auditor switching) on audit fee discounting using the bargaining power view.

The authors aim to exploit a natural experiment in which voluntary replace mandatory joint audits for Danish listed companies and analyse audit fee implications of using one or two audit firms.

Regression analysis is used. The authors apply both a core audit fee determinants model and an audit fee change model and include interaction terms.

The authors find short-term fee reductions in companies switching to single audits, but only where the former joint audit contained a dominant auditor. The authors argue that in this situation bargaining power is more with the auditors than in an equally shared joint audit, and that the auditors' incentives to offer an initial fee discount are bigger.

The number of observations is constrained by the small Danish capital market. Future research could take a more qualitative research approach, to examine whether the use of a single audit firm rather than two has an effect on audit quality. The area calls for further theory development covering audit fee and audit quality in joint audit settings.

Companies should consider their relationship with their auditors before deciding to switch to single auditors. Fee discounts do not seem to reflect long-lasting efficiency gains on the part of the audit firm.

Denmark is the first country to leave a mandatory joint audit system, so this is the first time that it is possible to study fee effects related to this.

This is the first REIT paper to seek to empirically examine potential influencing factors on the discounts and underwriting fees of Australian REIT rights issues.

Using a methodology similar to Owen and Suchard, and Armitage, a sample of 62 A‐REIT rights issues during 2001‐2009 is analyzed. A variety of potential factors influencing discounts and underwriting fees are explored.

Over A$20 billion was raised by A‐REIT rights issues during 2001‐2009 (this around three times that raised through A‐REIT initial public offerings during the same period). The mean offer price was discounted around 9.5 percent from the current market price and underwriting fees averaged 2.9 percent of gross proceeds raised – both substantially less than for industrial rights issues. The standard deviation of daily returns for the past year appears to influence the percentage discount offered to subscribers. This volatility was particularly noticeable in 2008 and 2009, during the global financial crisis, where new issues were discounted substantially so as to raise equity to repay debt. This historical risk variable appears paramount in determining the discounts to subscribers and fees to underwriters.

A‐REITs seeking to minimize the discounts offered to subscribers and to minimize their underwriting costs with rights issue equity capital raisings must first minimize their share price volatility.

This paper adds to the international costs of capital raising literature of REITs by examining such costs with A‐REIT rights issues and is the first paper to examine factors influencing these costs.

This study aims to empirically examine the impact of the price structure of two-sided markets on transaction volume and market share (MS) in the context of the Korean credit card industry. The Korean credit card market differs from those in the United States (U.S.) or Europe in terms of transaction structure (i.e. a three-party system in Korea vs a four-party system in the U.S. or Europe) and government policy. In addition to the merchant discount rate and the cardholder annual membership fee rate, the authors included and analyzed exogenous variables to eliminate any endogeneity. Based on the analysis results, the authors found that credit card usage performance (i.e. transaction volume) increases with an increase in the relative price ratio (merchant discount rate ÷ cardholder membership fee rate) paid by merchants and cardholders, provided that the total price (merchant discount rate + cardholder membership fee rate) paid by merchants and cardholders remains constant. Therefore, this study is the first to confirm that the Korean credit card market operated as the theoretical mechanism of a two-sided market during the analysis period. This effect can only be observed in specific cases such as the launch of the so-called “Chief Executive Officer(CEO)-designed card.” When a new CEO takes office in a credit card company and launches a “CEO-designed card,” there is a significant increase in not only card usage performance but MS as well owing to the price structure changes caused by expanding the benefits that customers derive from card use.

The purpose of this study is to investigate whether fees discounting exists in Malaysia and whether such a practice impairs auditor independence.

The paper employs a panel least regression of 3,003 firm‐year observations of firms listed on Bursa Malaysia for the period between 1996 and 2006. The paper collects the audit fees, auditor's identity and other firms' characteristics data from Compustat Global, Stock Performance Guide Handbook and annual reports. The annual reports are obtained from the Bursa Malaysia's web site and Mergent Online database. The paper removes initial public offering (IPO) firms, firms involved with PriceWaterhouse and Coopers and Lybrand merger and firms forced to switch auditor during the Arthur Andersen implosion in 2002.

The analysis shows that price cutting occurs on initial audit engagements even when audit fees are publicly disclosed. Further tests suggest that the auditor recovers the “sunk cost” invested during the initial engagement only during the fourth year of their audit engagement. Further, the paper finds price recovery is not significantly different from normal audit fees charged for the continuing audit engagement during the first three year period of engagement, as the audit firms will only recover the cost on the fourth year of engagement. Overall, this finding has an important implication for regulators, as it suggests that price recovery due to “lowballing” does not impair auditor independence.

Due to data unavailability, this study does not consider other unique factors that determine audit fees in Malaysia. Among them are political connections, institutional investors and ethnicity.

This is the first study that examines audit pricing during an initial engagement in Malaysia.

This study examines whether auditors’ pricing decisions on managerial ability are affected by auditor litigation risk (financial distress or financial crisis), auditor’s familiarity with their client or regulatory changes in the post-Sarbanes–Oxley Act of 2002 (SOX) era.

Building on the extant audit fee literature, this study constructs an audit fee determinants model to examine how context affects auditors’ pricing of managerial ability.

Auditors offer a larger fee discount to more able client management teams when auditors face lower litigation risks or are more familiar with the client. Furthermore, managerial ability has a more pronounced effect on audit fees in the post-SOX era when managers are mandated to play more active roles in financial reporting (i.e. certification of financial statements required by SOX 302).

Based on the audit risk model (Simunic, 1980), Krishnan and Wang (2015) show that the managerial ability of an audit client is relevant and important to auditors’ pricing decisions. This study demonstrates that managerial ability exhibits a non-linear relationship with audit fees and contextual factors, such as litigation risk, and that auditors’ familiarity with managers can alter the negative association between audit fees and managerial ability. This study extends Krishnan and Wang’s study by offering additional insights into auditors’ use of soft information such as managerial ability. Furthermore, the findings add to the literature on the impact of SOX on audit fees by suggesting that SOX has not only increased overall audit fees (Ghosh and Pawlewicz, 2009; Huang et al., 2009), it has also increased auditors’ price sensitivity to soft information (e.g. managerial ability).

This study provides insights for audit firms and client companies who are interested in understanding audit fee-pricing decisions. The findings also suggest that auditors need to be sensitive and responsive to various contextual factors when making pricing decisions.

Previous studies have not addressed the non-linear relationship between audit fees and soft information about managerial ability.

To review SEC enforcement action taken against an adviser over: failure to grant advisory fee breakpoint discounts based on the aggregation of related accounts requested by clients and related deficiencies in the adviser’s administration of the account aggregation feature.

Review and summarize the SEC’s finding’s regarding the adviser’s advisory fee breakpoint discount program, deficiencies in the program identified in SEC examinations, resulting violations of the Investment Advisers Act and its rules, the adviser’s remedial efforts and undertakings, and the sanctions imposed.

This settlement provides an important reminder for registered investment advisers of the need to fully address deficiencies identified in SEC examinations and of the attention paid by SEC inspection staff to client fees as a core examination area.

Practical explanation from experienced financial services lawyers.

The purpose of this paper is to provide a first evaluation of the effectiveness of the early bird discount on ski lift tickets by estimating the impact on hotel overnight stays of the Saas-Fee destination.

The difference-in-differences (DID) approach is used to compare winter sport destinations with and without the price reduction before and after the introduction of the price discount. The sample is composed of the 54 largest Swiss winter sport destinations for the seasons 2013/2014 and 2016/2017.

DID estimations show an increase in overnight stays of Swiss residents by 50 per cent as compared to the control group. Quantile regression estimations for the conditional upper part of the overnight stays distribution reveal a lower average treatment effect of 38 per cent. However, DID estimates for total overnight stays (domestic and foreign) are much smaller – about 17 per cent – indicating that the price reductions are not effective in attracting foreign visitors. Results are not sensitive when taking into account a large number of control variables (elevation, size and snow making capacity).

As tourists visiting winter sport destinations are interested in a mix of activities, lift ticket revenues or number of skier days should be used as an alternative outcome measure.

As positive effects on local tourism demand are mainly limited to Swiss tourists, such price strategies should be carefully considered. In the long term, the skiing market will stagnate or even shrink for several reasons (population ageing, climate change and changes in leisure preferences).

This paper provides a first quantitative evaluation of price discounts in tourism research. Knowledge about the discounts and consumers reactions to sales promotions are of great interest to marketing managers in today’s competitive ski market.