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
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: Suggested Citation