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Outline

Changes in Audit Market Competition and the Big N Premium

2012, Auditing-a Journal of Practice & Theory

https://doi.org/10.2308/AJPT-10295

Abstract

analyzing the change in Big N audit fee premium over the Big 6, Big 5, and Big 4 periods, and across different client segments. Using a large sample of Australian publicly listed companies over the years 1996-2007, we find that while premiums paid to Big N auditors have increased significantly for the Big 4 and Big 5 periods compared to the Big 6 period, the growth has not been shared equally across all client segments. In particular, while the largest global clients pay some of the highest premiums, the increase in premiums for this group in the Big 4 period has been lower than those experienced by other clients. We also observe that premiums paid to industry specialists have declined relative to the Big 6 period, but fee discounts offered to clients switching to a Big N auditor from a non-Big N auditor have increased. In all, we find that the premiums paid by Big N clients increased in line with consolidation in the number of Big N audit firms, but the impact varied across client segments.

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