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Audit office size, audit quality and audit pricing: Evidence from small- and medium-sized enterprises
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Business Administration. (Department of Accounting and Finance, University of Vaasa, Vaasa, Finland)
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Business Administration. (BI Norwegian Business School, Oslo, Norway)
2013 (English)In: Accounting and Business Research, ISSN 0001-4788, Vol. 43, no 1, 1-25 p.Article in journal (Refereed) Published
Abstract [en]

Using Swedish data, we investigate how audit quality and audit pricing vary with audit firm and office size. In contrast to prior studies, we use disciplinary sanctions issued against auditors not meeting the quality requirement as the measure of audit quality. We find no significant differences in the likelihood of sanctions between Big 4 audit firms and the fifth and sixth largest audit firms in Sweden (Grant Thornton and BDO). We refer to these collectively as ‘Top 6’. However, we find that the probabilities of warnings or exclusions from the profession are much higher for non-Top 6 auditors in Sweden than for Top 6 auditors. Furthermore, we find a strong negative association between the likelihood of sanctions and audit office size for non-Top 6 auditors. This association is insignificant for Top 6 audit firms. Audit fees follow a similar pattern and indicate that larger audit firms and offices put in more effort or have greater expertise. These results suggest that audit quality is differentiated in the private segment market. However, contrary to prior studies, our results suggest that the important dimensions are Top 6 versus non-Top 6 and the office size of non-Top 6 audit firms.

Place, publisher, year, edition, pages
Taylor & Francis, 2013. Vol. 43, no 1, 1-25 p.
National Category
Social Sciences
Research subject
Business Studies
URN: urn:nbn:se:umu:diva-57468DOI: 10.1080/00014788.2012.691710OAI: diva2:542106
Available from: 2012-07-30 Created: 2012-07-30 Last updated: 2013-02-21Bibliographically approved

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