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Appears in Collections:Accounting and Finance Working Papers
Title: Audit Market Structure, Fees and Choice following the Andersen Break-up: Evidence from the UK
Authors: Abidin, Shamharir
Beattie, Vivien
Goodacre, Alan
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Citation: Abidin S, Beattie V & Goodacre A (2008) Audit Market Structure, Fees and Choice following the Andersen Break-up: Evidence from the UK. University of Stirling, Department of Accounting, Finance and Law Working Paper. University of Stirling.
Keywords: Arthur Andersen
audit market
audit fees
Big 4
industry specialism
JEL Code(s): M49
Issue Date: Jan-2008
Publisher: University of Stirling
Series/Report no.: University of Stirling, Department of Accounting, Finance and Law Working Paper
Abstract: This paper presents evidence on audit market concentration and auditor fee levels in the UK market in the crucial period of structural change following the PricewaterhouseCoopers' (PwC) merger and encompassing Andersen's demise (1998-2003). Given the current interest in auditor choice, analysis is also undertaken at the individual audit firm level and by industry sector. There is evidence of significant upward pressure on audit fees since 2001 but only for smaller auditees. Audit fee income for top tier auditors (Big 5/4) did not change significantly while the number of auditees fell significantly, consistent with a move towards larger, less risky, clients. Andersen's demise markedly reduced the level of inequality among the top tier firms but PwC retained its position as a 'dominant firm'. On switching to the new auditor, former Andersen clients experienced audit fee rises broadly in line with inflation, with no evidence of fee premia or discounting. They also reported significantly lower NAS fees, consistent with audit firms and auditees responding to public concerns about perceptions of auditor independence. There is no general evidence of knowledge spillover effects or cross-subsidisation of the audit fee by NAS. The combined findings provide no evidence to indicate that recent structural changes have resulted in anticompetitive pricing; the key concern remains the lack of audit firm choice.
Type: Working or Discussion Paper
Affiliation: University Utara, Malaysia
University of Glasgow
Accounting and Finance

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