Product market competition and audit fees

Yuequan Wang, Chun Wai Andy Chui

Research output: Journal article publicationJournal articleAcademic researchpeer-review

12 Citations (Scopus)

Abstract

Existing theories posit two contradictory predictions on the relation between product market competition and audit fees. On the one hand, product market competition can mitigate agency problems between shareholders and managers and increase the accuracy of financial reporting, thus decreasing auditors’ assessments of audit risk. Hence, auditors tend to charge lower fees to firms in a more competitive industry. On the other hand, product market competition can increase auditors’ assessments of business risk. Therefore, audit fees are expected to increase with industry competitiveness. This study empirically tests the relation between product market competition and audit fees and finds that auditors charge more to firms in a more competitive industry.
Original languageEnglish
Pages (from-to)139-156
Number of pages18
JournalAuditing
Volume34
Issue number4
DOIs
Publication statusPublished - 1 Jan 2015

Keywords

  • Audit fees
  • Audit risk
  • Business risk
  • Earnings management
  • Product market competition

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

Cite this