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Audit Pricing and Cost Strategies of Japanese Big 3 Firms

Audit Pricing and Cost Strategies of Japanese Big 3 Firms This study aims to investigate whether and how audit fee determinants examined in prior studies influence audit fees and costs in the Japanese audit market, and to examine whether audit pricing and cost strategies differ among Japanese Big 3 firms. Prior studies have not fully examined audit costs and differences in audit pricing and cost strategies among large audit firms. Based on data pertaining to the 2006 audits of publicly listed companies conducted by Japanese Big 3 firms, the present study reveals that many audit fee determinants, such as client size, complexity, risk, whether the client is an SEC registrant, the audit firm's market share in the industry, and client bargaining power, influence audit costs. Other variables, such as the client's location, fiscal year end, and the audit firm's differentiation, influence only either audit fees or costs, or affect both audit fees and costs in opposite directions. Furthermore, the relationships between audit fees/costs and the determinants vary among Big 3 firms. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Auditing Wiley

Audit Pricing and Cost Strategies of Japanese Big 3 Firms

International Journal of Auditing , Volume 15 (2) – Jul 1, 2011

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Publisher
Wiley
Copyright
© 2011 Blackwell Publishing Ltd
ISSN
1090-6738
eISSN
1099-1123
DOI
10.1111/j.1099-1123.2010.00425.x
Publisher site
See Article on Publisher Site

Abstract

This study aims to investigate whether and how audit fee determinants examined in prior studies influence audit fees and costs in the Japanese audit market, and to examine whether audit pricing and cost strategies differ among Japanese Big 3 firms. Prior studies have not fully examined audit costs and differences in audit pricing and cost strategies among large audit firms. Based on data pertaining to the 2006 audits of publicly listed companies conducted by Japanese Big 3 firms, the present study reveals that many audit fee determinants, such as client size, complexity, risk, whether the client is an SEC registrant, the audit firm's market share in the industry, and client bargaining power, influence audit costs. Other variables, such as the client's location, fiscal year end, and the audit firm's differentiation, influence only either audit fees or costs, or affect both audit fees and costs in opposite directions. Furthermore, the relationships between audit fees/costs and the determinants vary among Big 3 firms.

Journal

International Journal of AuditingWiley

Published: Jul 1, 2011

References