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Self-Selection of Auditors and Audit Pricing in Private Firms
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- Paul K. Chaney
- a Vanderbilt University.
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- Debra C. Jeter
- a Vanderbilt University.
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- Lakshmanan Shivakumar
- b London Business School.
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Description
<jats:p>Prior research has examined audit pricing for publicly held firms and provided some evidence of a Big 8 premium in pricing. We investigate audit pricing among private firms, and provide evidence that private firms do not pay such a premium on average. The relatively greater degree of dispersion in auditor choice (between Big 5 and non-Big 5 auditors) in our large sample of privately held audit clients allows us to predict the auditor choice for each firm and to control for potential self-selection. We reject the null hypothesis that clients are randomly allocated across Big 5 and non-Big 5 auditors. Using standard OLS regressions, we document a Big 5 premium; however this premium vanishes once we control for self-selection bias. Moreover, we find that client firms choosing Big 5 auditors generally would have faced higher fees had they chosen non-Big 5 auditors, given their firm-specific characteristics. Our results are consistent with audit markets for private firms being segmented along cost-effective lines. Further, our results suggest that auditees in our setting do not, on average, view Big 5 auditors as superior in terms of the perceived quality of the services provided to a degree significant enough to warrant a fee premium.</jats:p>
Journal
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- The Accounting Review
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The Accounting Review 79 (1), 51-72, 2004-01-01
American Accounting Association
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Details 詳細情報について
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- CRID
- 1363670320813646464
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- ISSN
- 15587967
- 00014826
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- Data Source
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- Crossref