What if there were Three? Audit Pricing within the Big 4 and the PricewaterhouseCoopers' Premium in the Australian Audit Market

International Journal of Auditing (DOI: 10.1111/ijau.12011)

31 Pages Posted: 7 Aug 2013 Last revised: 20 Mar 2024

See all articles by Andrew Ferguson

Andrew Ferguson

University of Technology Sydney (UTS)

Tom Scott

Auckland University of Technology

Date Written: June 4, 2013

Abstract

This paper examines intra-Big 4 audit fee premiums in the Australian market. During the period examined (2002–2004), there is both Big 4 and intra-Big 4 market dominance. The three largest firms – the ‘Big 3’ (Ernst & Young, KPMG and PricewaterhouseCoopers) – hold over 80 per cent of audit fees for companies listed on the Australian Securities Exchange. We find the main feature of the Australian audit market over this period is a PwC brand premium, which suggests price competition and thus no collusive pricing. Within the Big 4, audit pricing effects are likely to be a growing area of inquiry in future audit pricing literature. Overall, our study implies that regulatory concerns about a lack of a competition in the audit market during this period are inconsistent with the audit pricing evidence.

Keywords: Audit pricing, Big 3, market structure, cartel, brand names, PwC

JEL Classification: D43, M41, M42, M48

Suggested Citation

Ferguson, Andrew and Scott, Tom, What if there were Three? Audit Pricing within the Big 4 and the PricewaterhouseCoopers' Premium in the Australian Audit Market (June 4, 2013). International Journal of Auditing (DOI: 10.1111/ijau.12011), Available at SSRN: https://ssrn.com/abstract=2306861

Andrew Ferguson

University of Technology Sydney (UTS) ( email )

15 Broadway, Ultimo
PO Box 123
Sydney, NSW 2007
Australia

Tom Scott (Contact Author)

Auckland University of Technology ( email )

AUT City Campus
Private Bag 92006
Auckland, 1142
New Zealand

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