Title page for ETD etd-11082013-133239

Type of Document Dissertation
Author Eshleman, John Daniel
Author's Email Address jeshle1@tigers.lsu.edu
URN etd-11082013-133239
Title The Effect of Audit Market Concentration on Audit Pricing and Audit Quality: The Role of the Size of the Audit Market
Degree Doctor of Philosophy (Ph.D.)
Department Accounting
Advisory Committee
Advisor Name Title
Cheng, Agnes Committee Chair
Reichelt, Kenneth Committee Co-Chair
Legoria, Joseph Committee Member
Soileau, Jared Committee Member
  • audit market concentration
  • audit quality
  • audit fees
Date of Defense 2013-11-06
Availability unrestricted
The GAO has recently expressed concern that audit market concentration (i.e., not client concentration) could result in greater audit fees and lower audit quality. However, the extant literature finds that local audit markets with higher concentration have lower audit fees (Numan and Willekens 2012) and fewer accounting restatements (Newton et al. 2013). In this study, I show that the effect of audit market concentration on the level of audit fees depends on the size of the audit market (i.e., the size and/or number of clients in the local geographic area). When the audit market contains fewer clients and/or those clients are small in size, audit fees are increasing in audit market concentration. Conversely, in markets where there are a large number of clients and/or the clients are large in size, audit market concentration leads to lower audit fees. In additional tests, I examine whether the relationship between audit market concentration and audit quality also depends on the size of the audit market. The evidence suggests that audit quality is higher in markets where both audit market concentration and audit market size are high.
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