How Do Regulation and Deregulation of Audit Fees Influence Audit Quality?: Empirical Evidence from Japan

Kasai, Naoki; Takada, Tomomi

doi:10.2139/ssrn.2179908

Cited by 6 publications

(6 citation statements)

References 32 publications

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“…The higher audit fee paid by adopters of non-Japanese accounting standards is consistent with prior study [39]. These results can be attributed to company and auditor size, as results from Table 4 show that non-Japanese GAAP adopters are more likely to be large size clients that employ Big N auditors.…”

Section: Frendy Open Journal Of Accountingsupporting

confidence: 85%

“…The highest peak of audit fee in 2007 can be attributed to more stringent accounting and auditing regulations following the amendment of Financial Instruments and Exchange Law and stricter JICPA self-regulations [39]. Audit fee returns to a lower equilibrium as a response from clients' pressure to decrease audit fee after the 2007 audit fee hike [42].…”

Section: Regression Models Descriptive Statistics and Estimation Resultsmentioning

confidence: 99%

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

Frendy¹

2018

OJAcct

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The 2006 dissolution of PwC ChuoAoyama significantly changed market share composition of Japanese audit firms which marked the transition from Big 4 period to Big 3 period. This study aims to investigate audit market pricing competitiveness between Big N and non-Big N auditors using a sample of Japanese firms listed in the First Section of Tokyo Stock Exchange during the transition from Big 4 period (2004)(2005) to Big 3 period (2006)(2007)(2008)(2009)(2010)(2011). This paper analyzes audit market pricing competitiveness between Big N and non-Big N auditors by employing panel fixed effects multivariate regression with audit fee as the dependent variable and interaction between audit fee premium and client segment size as variable of interest while controlling for other variables affecting audit fee. The empirical results indicate a non-competitive audit pricing market between Big N and non-Big N auditors where Big N auditors earn increasingly higher audit fee as client segment size becomes larger.

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Section: Frendy Open Journal Of Accountingsupporting

confidence: 85%

Section: Regression Models Descriptive Statistics and Estimation Resultsmentioning

confidence: 99%

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

Frendy¹

2018

OJAcct

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“…The USA Florida was the last state restricting audit prices but was released later. Another similar case is in Japan [21].…”

Section: Institutional Backgroundmentioning

confidence: 76%

Sustainable Development of Audit Market: Benefits of Audit Price Deregulation in China

Cao

Zhao²,

Wang³

et al. 2022

Sustainability

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Utilizing a unique audit price deregulation policy in China, we examine industry-specialized auditors’ competing strategies in different markets. Our results from the difference-in-difference model reveal that after audit price deregulation, audit fees of industry-specialized auditors in less developed markets become significantly lower than other auditors. Furthermore, we find the decreased audit fees of the industry specialists are not due to the reduced audit effort, and the audit quality is not impaired. On the other hand, industry specialists cannot keep their audit fee premium in more developed markets after the policy. These results indicate that audit price deregulation makes industry-specialized auditors more available, which benefits the market’s sustainable development. Our study contributes significantly to the industry specialized auditor literature by providing novel evidence that industry specialists’ competing strategies could depend on the market’s development.

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“…IFRS measures the impact of accounting standard complexity on audit pricing. Prior literature finds that Japanese companies that employ non-Japanese accounting standards are more likely to pay audit fee premiums because of additional complexity (De George et al, 2013;Kasai and Takada, 2012). Appendix 2 provides the definitions and measurements of the other variables.…”

Section: Empirical Modelsmentioning

confidence: 99%

Employing string similarity metrics of partners to estimate audit team continuity: determinant and its effects on audit outcomes and pricing

Frendy

Takeda

2023

JAL

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PurposePartners are responsible for allocating audit tasks and facilitating knowledge sharing among team members. This study considers changes in the composition of partners to proxy for the continuity of the audit team. This study examines the effect of audit team continuity on audit outcomes (audit quality and report lags), pricing and its determinant (lead partner experience), which have not been thoroughly examined in previous studies.Design/methodology/approachThis study employs string similarity metrics to measure audit team continuity. The study employs multivariate panel data regression empirical models to estimate a sample of 26,007 firm-years of listed Japanese companies from 2008 to 2019.FindingsThe study reveals that audit team continuity is negatively associated with audit fees, regardless of the auditor’s size. This finding contributes to the existing literature by showing that audit team continuity represents one of the determinant factors of audit fee. For clients of large audit firms, companies with higher (lower) audit team continuity issue audit reports in less (more) time. The experience of lead partners is a strong predictor of audit team continuity, irrespective of audit firm size. Audit quality is not associated with audit team continuity for either large or small audit firms.Originality/valueThis study proposes and examines audit team continuity measures that employ string similarity metrics to quantify changes in the composition of partners in consecutive audit engagements. Audit team continuity expands upon the tenure of individual audit partners, which is commonly used in prior literature as a measure of client–partner relationships.

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How Do Regulation and Deregulation of Audit Fees Influence Audit Quality?: Empirical Evidence from Japan

Cited by 6 publications

References 32 publications

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

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

Sustainable Development of Audit Market: Benefits of Audit Price Deregulation in China

Employing string similarity metrics of partners to estimate audit team continuity: determinant and its effects on audit outcomes and pricing

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