De impact of audit effort op de relatie tussen audit prijzen en industry specialisatie.

The project is motivated by the discussion at EU level (Green Paper on Audit) on two following topics : How can audit quality be enhanced and competition in the audit market be increased? Audit quality is an important issue because of its impacts on investor behavior. As audit quality is unobservable, in the literature audit firm size or industry specialization are used as proxies. Previous studies show that specialization is associated with higher financial reporting quality but found no consistent evidence about fee premiums for specialists (Hay et al., 2006). We want to disentangle theoretical explanations for this conflicting evidence by introducing audit hours in those relationships. We link specialization to audit effort and then investigate its effect on fees controlling for effort. Furthermore, we also study the impact of possible drivers of audit quality: partner rotation, non-audit services, audit tenure and the competition in the audit market (Numan and Willekens, 2010), issues which are raised by the EU. The outcome from this project contributes to the academic literature as this study provides insights on conflicting evidence found. Finally, given the recent debate at EU level, the outcome of this project is interesting for regulators too.

Trefwoorden:Audit pricing, Industry specialization, Audit effort