Determinants of Audit Fees : Further Evidence from Germany and Switzerland
Series
Schriften der Assistierenden der Universität St. Gallen (HSG)
ISBN
978-3-7272-2285-6
Type
book section
Date Issued
2011
Author(s)
Editor(s)
Tanner, Anne-Cathrine
Abstract
Research in the market for audit services has grown at a significant rate over recent years. Of central interest has been the question as to what factors in-fluence the level of fees paid for the supply of audit services. The seminal work in the area is attributed to SIMUNIC (1980) in the US market where a relatively complex ordinary least squares regression function was developed to model audit fees. Since then a lot of audit fee determinants research for different international markets have been published over the last 28 years (17 countries, 56 studies). However, the market for audit fees in central Europe is less investigated. In particular there are just few studies analyzing the German speaking countries: Austria, Germany and Switzerland.
While a long list of the determinants of audit fees such as client size, audi-tor's business risk and audit complexity have been identified in the literature, the results from different countries regarding the impact of these factors have been somewhat ambiguous. This has been concluded, for instance, by HAY, KNECHEL and WONG (2006) and COBBIN (2002). This might be due to cultural differences and to effects of the accounting and economic environment or the historic development of the audit market in each country or region. In addition, the focus of former studies has been mostly the detection of audit fee premiums associated with audits performed by Big Four (previously Big 5, 6, or 8) audit firms in comparison to Non-Big Four professionals, which we call a " Big Four premium", in this paper. These studies have proprovided mixed evidence on the existence and magnitude of a fee premium. These conflicting findings provided the motivation for us to test the hypothesized factors of influences on audit fees in some markets of central Europe.
The research possibilities are limited by the availability of data sources. Since 2005 the disclosure of audit fees is mandatory for listed companies in Germany and Austria and for public firms in the Swiss prime standard. Thus, the findings in this study are restricted to public firms. Since for the Austrian market the audit fee disclosures were just available for 12 companies we had to drop the market from our sample.
The intention of this paper is the contribution of evidences from German speaking audit markets to the existing studies. It extends and replicates pre-vious studies on audit fees and the market for audit services. The results might have implications both for globally operating audit firms and multina-tional companies in need of audit services. A better framework for audit pricing is desirable in an increasingly growing and complex international auditing business. Identifying which determinants of audit fees are unique to a certain environment can be useful to price audit services.
While a long list of the determinants of audit fees such as client size, audi-tor's business risk and audit complexity have been identified in the literature, the results from different countries regarding the impact of these factors have been somewhat ambiguous. This has been concluded, for instance, by HAY, KNECHEL and WONG (2006) and COBBIN (2002). This might be due to cultural differences and to effects of the accounting and economic environment or the historic development of the audit market in each country or region. In addition, the focus of former studies has been mostly the detection of audit fee premiums associated with audits performed by Big Four (previously Big 5, 6, or 8) audit firms in comparison to Non-Big Four professionals, which we call a " Big Four premium", in this paper. These studies have proprovided mixed evidence on the existence and magnitude of a fee premium. These conflicting findings provided the motivation for us to test the hypothesized factors of influences on audit fees in some markets of central Europe.
The research possibilities are limited by the availability of data sources. Since 2005 the disclosure of audit fees is mandatory for listed companies in Germany and Austria and for public firms in the Swiss prime standard. Thus, the findings in this study are restricted to public firms. Since for the Austrian market the audit fee disclosures were just available for 12 companies we had to drop the market from our sample.
The intention of this paper is the contribution of evidences from German speaking audit markets to the existing studies. It extends and replicates pre-vious studies on audit fees and the market for audit services. The results might have implications both for globally operating audit firms and multina-tional companies in need of audit services. A better framework for audit pricing is desirable in an increasingly growing and complex international auditing business. Identifying which determinants of audit fees are unique to a certain environment can be useful to price audit services.
Language
English
Keywords
Audit Fees
Big Four
Audit Pricing
Auditor Size
Empirical
HSG Classification
contribution to scientific community
Refereed
No
Book title
Schweiz und Europa - Auswirkungen auf Wirtschaft, Recht und Gesellschaft
Publisher
Stämpfli
Publisher place
Bern
Number
Bd. 6
Start page
457
End page
480
Pages
24
Subject(s)
Eprints ID
174605