Audit Market Structure and Competition in Australia

Abstract

The purpose of this review is to synthesise the existing research literature regarding the underlying structure and competitiveness of the Australian audit market. We consider the findings of Australian academic research, which has examined audit fees, non-audit fees, market concentration, auditor choice, auditor switching and audit firm mergers. We identify the key metrics used to evaluate market structure in the academic literature and then document changes in these metrics in the Australian audit market for listed company audits during the period 2000-2011. Our analysis shows that the audit market is both highly segmented and supplier-concentrated. We find that audit fees in Australia have increased over this period, which can be attributed to increased regulation and resulting increased audit effort needed to complete audit engagements in times of regulatory change and more recently, the global financial crisis. We provide regulators, standard setters and the profession with an evidenced-based perspective on the market for the listed company audits, which is an important input into any future proposals to regulate the Australian audit market.

Accounting Research in Abacus, A&F, AAR, and AJM from 2008–2015: A Review and Research Agenda

“…Nonetheless, the area has attracted a lot of attention in recent publications and is starting to emerge as one of the healthiest and most fruitful research streams. There are many emerging areas in audit research, including competition and pricing (Carson, ; Carson et al ., ; Ciconte et al ., ; Dutillieux et al ., ; Kend et al ., ; van der Laan and Christodoulou, ); the effects of regulatory change (Carey et al ., ; Houghton et al ., ; Lee et al ., ); trust (Howieson, ); reputation (Bigus, ); and audit judgement and decision making (Trotman et al ., ).…”

Big N and Non-Big N Audit Pricing Competitiveness in Japan during Transition from Big 4 to Big 3 Period

“…In a competitive audit market, auditors with superior service differentiation systematically charge higher fee for all their clients irrespective of their clients' size [24]. Audit market is competitive when Big N auditors differentiate their service to justify their fee premium in both large and small client segments [20]. On the other hand, audit market is not competitive when Big N firms charge higher fees in the large client market relative to smaller market segment [19].…”

“…The number of audit staff working on the audit engagement is employed to control for one of the major determinants of audit fee and audit effort. Carson et al (2014) argue that the observed increase of audit fees in Australian from 2000-2011 might be driven by higher audit effort that is driven by the global financial crisis and more stringent regulations [20]. Following Kim and Fukukawa (2013), the unique dataset of Japanese firms disclosure information is employed and natural log of number of CPAs, junior accountants and other staffs employed in the audit engagement (excluding engagement partners) is calculated (TEAM variable) [25].…”

“…The audit market for small size clients represents a yardstick for a price-competitive audit market because the demands for audit service from a large number of small clients has low barrier to entry that can be provided by a large number of auditors. Audit market pricing between Big N and non-Big N auditors is competitive when Big N auditors differentiate their service to justify the Big N fee premium in both large and small client segments [19] [20]. Thus, audit market competitiveness between Big N Frendy DOI: 10.4236/ojacct.2018.…”

Research in auditing: main themes

“…e papers refer to factors associated to rms in the audit market. As an example we can point to establishment of audit rms, studies related to audit rms (big audit rms and smaller ones), audit fees, fees awarded for audit services, factors concerning mandatory rotation of the Research in auditing: main themes audit rm, the monopoly of audit rms, and joint audit between audit rms (Caramanis, 2005;Carson, Redmayne, & Liao, 2014;Choi, Kim, Liu, & Simunic, 2008;De Franco, Gavious, Jin, & Richardson, 2011;Elliott, Ghosh, & Peltier, 2013). is theme had a result seven times higher and it is third in representativeness (27.6%), present during the whole project's period and in all journals.…”