Audit Office Size, Audit Quality and Audit Pricing

By Jong-Hag Choi, Chansog Kim, Jeong‐Bon Kim, Yoonseok Zang. 2010

610 citations recorded by the source corpus.

SUMMARY: Using a large sample of U.S. audit client firms over the period 2000–2005, this paper investigates whether and how the size of a local practice office within an audit firm (hereafter, office size) is a significant, engagement-specific factor determining audit quality and audit fees over and beyond audit firm size at the national level and auditor industry leadership at the city or office level. For our empirical tests, audit quality is measured by unsigned abnormal accruals, and the office size is measured in two different ways: one based on the number of audit clients in each office and the other based on a total of audit fees earned by each office. Our results show that the office size has significantly positive relations with both audit quality and audit fees, even after controlling for national-level audit firm size and office-level industry expertise. These positive relations support the view that large local offices provide higher-quality audits compared with small local offices, and that s...

Subfields: Accounting, Finance

View Paper: https://www.semanticscholar.org/paper/20122ddd7848906456e04c637fa8ceb4a206a529

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Citations in the corpus

Non-audit Services and Audit Quality: Evidence from Private Firms (2013, background): “It has been theoretically suggested (DeAngelo, 1981b), and empirically supported in the USA, that Big 4 audit firms perform higher quality audits than non-Big 4 audit firms (Francis et al., 1999; DeFond et al., 2002; Li, 2009; Choi et al., 2010).”
The Contagion Effect of Low-Quality Audits (2013, background): “This ﬁnding extends Francis and Yu (2009) and Choi et al. (2010) by showing that a greater use of industry expertise mitigates the small-ofﬁce effect documented in these studies.”
City-level auditor industry specialization, economies of scale, and audit pricing (2012, background): “Recent studies (Francis and Yu 2009; Choi et al. 2010) suggest that larger city offices provide higher quality audits.”
Is the Audit Fee Disclosure a Leading Indicator of Clients' Business Risk? (2011, result): “For example, recent evidence (e.g., Whisenant et al. 2003; Francis and Wang 2005; Krishnan et al. 2005; Ghosh and Pawlewicz 2009; Choi et al. 2010) shows that audit fees are positively (negatively) associated with concurrently observed debt levels, losses, and market volatility (liquidity ratios, re”
Geographic Proximity between Auditor and Client: How Does it Impact Audit Quality? (2012, neutral): “…2000), (2) whether auditor industry expertise is firm-wide or office specific (e.g., Ferguson et al. 2003; Francis et al. 2005; Reichelt and Wang 2010), and (3) whether audit quality is associated with the size of the audit engagement offices (e.g., Choi et al. 2010; Francis and Yu 2009, 2011).”
Audit Committee Effectiveness, Audit Quality and Earnings Management: An Empirical Study of the Listed Companies in Egypt (2014, background): “This result is also consistent with the vast majority of the previous research that investigates the effect of financial experts on earnings management, such as that of Choi et al., (2004); Park & Shin (2004); Carcello & Neal (2003); Chen et al.”
Does a Lack of Choice Lead to Lower Quality?: Evidence from Auditor Competition and Client Restatements (2013, neutral): “…and audit pricing are primarily made at the local office level (Francis et al. 1999; Reynolds and Francis 2000), and variations in auditor expertise and audit quality have also been documented across offices within the same audit firm (e.g., Krishnan 2005; Choi et al. 2010; Francis et al. 2013).”
Is the effect of industry expertise on audit pricing an office-level or a partner-level phenomenon? (2014, positive): “1 Introduction Since Francis et al. (1999) and Reynolds and Francis (2001), audit researchers have changed the level of analysis of auditor behavior from the audit firm (firm) to the audit office (office) (e.”