A Test of Audit Pricing in the Small-Client Segment: A Comment
Abstract
This study is the second to provide a richer test of the association between auditor size and audit fees by using three audit firm size classes in the small-client segment of the U.S. audit market. The finding of a Big 8 (now Big 6) price premium is consistent with Francis and Simon [1]. However, this price premium exists only with respect to local/regional firms. Francis und Simon showed that the Big 8 price premium exists with respect to both second-tier and local/regional firms. The present study also provides evidence of a second-tier price premium over local/regional firms. The results imply product differentiation to both Big 8 and second-tier firms. Plausible reasons for differences in results between the two studies are given.
Citation
Gist, W. E. (1995). A Test of Audit Pricing in the Small-Client Segment: A Comment. Journal of Accounting, Auditing & Finance, 10(2), 223-233. doi: 10.1177/0148558x9501000202