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Partner industry specialization and audit pricing in the United Kingdom

journal contribution
posted on 18.03.2019 by Khairul A. Mohd Kharuddin, Ilias G. Basioudis, David Hay
This study investigates the effects of audit partner industry specialization on audit pricing in the U.K. market. The mandatory disclosure of the name of the engagement partner in the auditor reports of U.K. public listed companies took effect from 6 th April 2008. Given that the identity of the audit partner is now observable to users of financial statements, it can be argued that there may be an incentive for partner-level differentiation in auditing products, and hence, audit quality. This research examines whether auditor industry expertise in the U.K is driven either by firm, office or partner level expertise. The fee premium observed in the study is a joint product of firm and partner level of industry expertise with the highest premium occurring when the client is also audited by an industry leading partner. This finding lends support to the argument that industry expertise is uniquely attributable to the individual audit partner’s human capital in terms of their knowledge and experience from leading audit engagements in a particular industry. It also provides evidence that some of the fee premiums earned by audit firms and documented in prior literature are most probably the product of the individual audit partner’s expertise

History

School

  • Business and Economics

Department

  • Business

Published in

Journal of International Accounting, Auditing and Taxation

Volume

35

Pages

57-70

Citation

MOHD KHARUDDIN, K.A., BASIOUDIS, I.G. and HAY, D., 2019. Partner industry specialization and audit pricing in the United Kingdom. Journal of International Accounting, Auditing and Taxation, 35, pp.57-70.

Publisher

© Elsevier Inc.

Version

AM (Accepted Manuscript)

Publisher statement

This paper was accepted for publication in the journal Journal of International Accounting, Auditing and Taxation and the definitive published version is available at https://doi.org/10.1016/j.intaccaudtax.2019.05.005

Acceptance date

01/12/2018

Publication date

2019-05-18

Copyright date

2019

ISSN

1061-9518

Language

en

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