An Empirical Investigation of the Audit Market in the U.S. Healthcare Sector
Journal of Public Budgeting, Accounting, and Financial Management, 24(4): 639-659, 2012
Posted: 27 Jan 2017
Date Written: 2012
The purpose of this paper is to analyze the market for audit services for publicly traded companies operating in the US for-profit (FP) healthcare sector. Complex national and local healthcare laws and regulations suggest the importance of assessing fee effects of joint national-level and city specific expertise among auditors. Using cross-sectional OLS regression analysis, we find that joint expertise significantly affects audit pricing in the healthcare sector. We find a fee premium of 33.6 percent on engagements where auditors are both national and city-specific specialists. We also find that Big-4 auditor reputation is significantly priced in addition to joint auditor expertise, and a significant positive association exists between audit and non-audit service fees — indicating the presence of knowledge spillover effects among healthcare company auditors.
Keywords: Audit Fees, Big-4 Firms, Healthcare, Industry Expertise, Knowledge Spillover
JEL Classification: M40, M41, M42, M48, M49
Suggested Citation: Suggested Citation