Big 4 audit fee premiums for national and office-level industry leadership in the United Kingdom

Ilias G. Basioudis, Jere R. Francis

Research output: Contribution to journalArticle

Abstract

The pricing of Big 4 industry leadership Is examined for a sample of U.K. publicly-listed companies, and adds to the evidence from the Australian and U.S. audit markets that city-specific industry leadership commands a fee premium. There is a significant fee premium for city-specific industry leaders relative to other Big 4 auditors, but no evidence that either the top-ranked or second-ranked firm nationally commands a fee premium relative to other Big 4 auditors, after controlling for city-level industry leadership. We also test for Big 4 fee premiums relative to non-Big 4 auditors and the U.K. data suggest a three-level hierarchy based on audit fee differentials: (1) Big 4 city-specific industry leaders have the largest fees; (2) other Big 4 auditors (noncity leaders) and second-tier national firms have comparable fees that are lower than Big 4 city leaders but larger than third-tier firms; and (3) third-tier accounting firms have the lowest fees.

Original languageEnglish
Pages (from-to)143-166
Number of pages24
JournalAuditing
Volume26
Issue number2
DOIs
Publication statusPublished - Nov 2007

Keywords

  • industry leadership
  • cost
  • Big 4 auditors
  • city-level industry leadership

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