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Industry specialization and audit fees: a meta-analytic approach

Industry specialization and audit fees: a meta-analytic approach PurposeThe purpose of this paper is to provide a comprehensive review of the literature that links auditor’s industry specialization (AIS) and audit fees (AFs) in order to clarify the puzzle of published results and provide overall conclusions that would help in future research.Design/methodology/approachTo achieve this goal, the authors applied meta-analysis techniques in order to summarize, quantify and evaluate the published data related to the association between AIS and AF.FindingsThe meta-results are more robust when the proxy for AIS is the audit firm’s market share above 20 percent or the audit firm is jointly the national and city leader. For US-based studies, results are homogeneous in the post-SOX period. This is likely due to the higher demand for specialized auditors. The authors found positive and homogeneous results in the upper and lower market segment, which led to the conclusion that the bargaining power of the big auditees does not fully counteract the higher auditor specialization costs. Although the authors identified a publication selection bias, a specialization coefficient of around 2.0 percent was estimated.Originality/valueThe conclusions are relevant for those researchers that would benefit from a structured and systematic review of the published results. The outcomes help to understand the somehow contradictory empirical evidence and to provide solid foundations for future hypothesis developments. This contribution is also relevant for the regulatory bodies, always watchful of audit market behavior and the evolution of audit prices. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Academia Revista Latinoamericana de Administración Emerald Publishing

Industry specialization and audit fees: a meta-analytic approach

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1012-8255
DOI
10.1108/ARLA-06-2014-0083
Publisher site
See Article on Publisher Site

Abstract

PurposeThe purpose of this paper is to provide a comprehensive review of the literature that links auditor’s industry specialization (AIS) and audit fees (AFs) in order to clarify the puzzle of published results and provide overall conclusions that would help in future research.Design/methodology/approachTo achieve this goal, the authors applied meta-analysis techniques in order to summarize, quantify and evaluate the published data related to the association between AIS and AF.FindingsThe meta-results are more robust when the proxy for AIS is the audit firm’s market share above 20 percent or the audit firm is jointly the national and city leader. For US-based studies, results are homogeneous in the post-SOX period. This is likely due to the higher demand for specialized auditors. The authors found positive and homogeneous results in the upper and lower market segment, which led to the conclusion that the bargaining power of the big auditees does not fully counteract the higher auditor specialization costs. Although the authors identified a publication selection bias, a specialization coefficient of around 2.0 percent was estimated.Originality/valueThe conclusions are relevant for those researchers that would benefit from a structured and systematic review of the published results. The outcomes help to understand the somehow contradictory empirical evidence and to provide solid foundations for future hypothesis developments. This contribution is also relevant for the regulatory bodies, always watchful of audit market behavior and the evolution of audit prices.

Journal

Academia Revista Latinoamericana de AdministraciónEmerald Publishing

Published: Aug 3, 2015

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