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Partner industry specialization and audit pricing in the United Kingdom
journal contribution
posted on 2019-03-18, 10:43 authored by Khairul A. Mohd Kharuddin, Ilias G. Basioudis, David HayThis 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 TaxationVolume
35Pages
57-70Citation
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.2019.05.005Acceptance date
2018-12-01Publication date
2019-05-18Copyright date
2019ISSN
1061-9518Publisher version
Language
- en