دانلود رایگان مقاله انگلیسی رقابت هزینه بین 4 حسابرس معروف و کیفیت حسابرسی - اشپرینگر 2018

Abstract

Both the GAO (Public accounting firms: mandated study on consolidation and competition. GAO, Washington, 2003; Audits of public companies: continued concentration in audit market for large public companies does not call for immediate action. GAO, Washington, 2008) and the US Treasury (Advisory committee on the auditing profession: final report, 2008. http://www.tres.gov/offices/domestic-finance/acap/docs/ final-report.pdf) have implied that the Big 4 dominated US audit market lacks competition. More recently, the PCAOB has expressed a somewhat different concern, i.e., that because audit committees may be primarily interested in negotiating a lower audit fee (rather than championing higher audit quality) for their clients, fee competition in the US audit market could pressure the incumbent auditor to compromise on audit quality (Doty in Keynote address: the reliability, role and relevance of the audit: a turning point, 2011. www.pcaobus.org). We utilize the notion of counterfactual fees chargeable by auditors to assess fee competition and investigate competing views on the relation between fee competition among Big 4 auditors and audit quality in US local audit markets. To operationalize fee competition at the client-level in the context of each local audit market, we compute a separate counterfactual audit fee that would be charged by every other Big 4 auditor for that particular engagement and use the minima of the counterfactuals. We validate our audit fee competition metric by showing a positive relation with the incumbent auditor’s switching risk. Collectively, our findings suggest that fee competition is useful as a mechanism for improving audit quality in the highly concentrated US audit market, albeit only in local audit markets where the incumbent auditor has below-median market power and only for higher quality clients. Overall, our findings speak to the interplay between fee competition and auditor incentives and are of potential interest to regulators such as the PCAOB concerned about competition in US audit markets.

5 Concluding remarks

In recent years, the GAO (2003, 2008) and the US Treasury (2008) have implied that the Big 4 dominated US audit market lacks competition, whereas the PCAOB (Doty 2011) has expressed the somewhat opposite concern that price competition in the US audit market could pressure the incumbent auditor to compromise on audit quality (Doty 2011). In this study, we investigate whether incumbent Big 4 auditors face audit fee competition in US local audit markets from other Big 4 auditors, and examine the relation between such competition and the quality of the audit.

We assess audit fee competition as the audit fee charged by the incumbent Big 4 auditor less the lowest projected (counterfactual) audit fee that would be charged by any other Big 4 auditor for that particular engagement, scaled by client total assets. For audit engagements that have a lower counterfactual fee (i.e., engagements that have audit fee competition), the audit fee competition metric is positive. A unique feature of our fee competition metric is that it is client-specific and it recognizes that the incumbent Big 4 firm may face fee competition from another Big 4 auditor for some of its clients but not other clients in the same local audit market. This feature distinguishes it from other competition proxies (i.e., the Herfindahl index and spatial distance) that are either local audit market-specific or local industry-audit market-specific.