Audit office size, audit quality and audit pricing: evidence from small- and medium-sized enterprises
Journal article, Peer reviewed
MetadataShow full item record
- Scientific articles 
Using Swedish data we investigate how audit quality and audit pricing vary with audit firm and office size. In contrast to prior studies, we use disciplinary sanctions issued against auditors not meeting the quality requirement as the measure of audit quality. We find no significant differences in the likelihood of sanctions between Big 4 audit firms and the fifth and sixth largest audit firms in Sweden (Grant Thornton and BDO). We refer to these collectively as ‘Top 6’. However, we find that the probabilities of warnings or exclusions from the profession are much higher for non-Top 6 auditors in Sweden than for Top 6 auditors. Furthermore, we find a strong negative association between the likelihood of sanctions and audit office size for non-Top 6 auditors. This association is insignificant for Top 6 audit firms. Audit fees follow a similar pattern and indicate that larger audit firms and offices put in more effort or have greater expertise. These results suggest that audit quality is differentiated in the private segment market. However, contrary to prior studies, our results suggest that the important dimensions are Top 6 versus non-Top 6 and the office size of non-Top 6 audit firms.
This is the authors’ refereed manuscript to the article
PublisherTaylor & Francis
JournalAccounting and Business Research
Showing items related by title, author, creator and subject.
Vik, Caroline; Walter, Marte Caroline (Master thesis, 2017)As of December 15th 2016, the audit reporting requirements in Norway have changed in a number of aspects. The most substantial change is the reporting of Key Audit Matters (KAM). ISA 701, Communicating Key Audit Matters ...
Svanström, Tobias (Journal article; Peer reviewed, 2013)The purpose of this study is to examine the relationship between audit quality in private firms and the provision of non-audit services (NAS) - an issue that has rarely been considered in prior research. The threats to ...
Alexeyeva, Irina; Svanström, Tobias (Journal article; Peer reviewed, 2015)Purpose - The paper aims to investigate audit and non-audit fees during the global financial crisis (GFC) in an environment that is relatively sparsely regulated with regard to the provision of non-audit services. Desig ...