Ding, Rong and Jia, Yuping (2012) Auditor mergers, audit quality and audit fees : evidence from the PricewaterhouseCoopers merger in the UK. Journal of Accounting and Public Policy, 31 (1). pp. 69-85. doi:10.1016/j.jaccpubpol.2011.08.002

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Abstract

Focusing on the merger of Price Waterhouse and Coopers & Lybrand in 1998, we document increased audit quality (measured by earnings quality of the clients) for the merged firm and other big-X auditors (The big-X auditors are Ernst & Young, Deloitte, KPMG and Arthur Anderson.) during the post-merger period because: (1) controlling for economic conditions, clients of big-X auditors have lower levels of absolute discretionary accruals and (2) the value relevance of earnings has significantly increased. Furthermore, we find evidence that in the post-merger period, there is a significant increase in audit fees for PricewaterhouseCoopers and other big-X client firms, which suggests that the effect of collectively enhanced market power of big-X auditors (which tends to increase audit fees) dominates the effect of cost savings from the merger (which tends to lower audit fees). The results have implications for regulators and policy makers.

Item Type:	Journal Article
Divisions:	Faculty of Social Sciences > Warwick Business School > Accounting Faculty of Social Sciences > Warwick Business School
Journal or Publication Title:	Journal of Accounting and Public Policy
Publisher:	Elsevier Inc.
ISSN:	0278-4254
Official Date:	January 2012
Dates:	Date Event January 2012 Published 27 August 2011 Available
Volume:	31
Number:	1
Number of Pages:	16
Page Range:	pp. 69-85
DOI:	10.1016/j.jaccpubpol.2011.08.002
Status:	Peer Reviewed
Publication Status:	Published
Access rights to Published version:	Restricted or Subscription Access

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