The Relation of Auditor Industry Specialisation to Local Government Audit Fees
Posted: 27 Jun 1997
Date Written: April 1997
Recent research on municipal audit fee models has identified anomalous results for auditor experience and audit fee premia. The primary purpose of this study is to determine whether audit fee premia exist for industry audit specialists and, if so, whether audit fee premia attaches to brand name firms, industry specialists or brand name, industry specialists. The hypotheses are based on arguments that fee premia are paid for audit quality associated with audit firms who make industry specific investments. This research is based on a small sample study that controls for critical variables such as the industry subject to audit and the type of audit engagement. Information collected for 67 Western Australian municipalities provides the data for the statistical tests. The results confirm that audit premia are achieved by brand name specialist audit firms and non-brand name audit specialist firms but not by brand name non- specialist audit firms. These results are robust to various measures of audit specialist.
JEL Classification: M40, M49, L84
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