Abstract:
This paper investigates brand name, industry specialization, and leadership audit pricing
in the wake of the mergers that created the Big 6 and the Big 5 accounting firms. For samples
of Australian listed public companies in each of the postmerger years 1990, 1992,
1994, and 1998, we estimate national audit fee premiums for the Big 6/5 auditors and the
industry specialists and leaders. We find limited support for the ability of the Big 6/5 to
obtain fee premiums over non-Big 6/5 for those industries not having specialist auditors.
Nonspecialist Big 6/5 auditors are able to obtain fee premiums over nonspecialist non-Big
6/5 auditors for those industries having specialist auditors. However, this result only holds
among the smaller half of our sample. We do not find strong support for the presence of
industry specialist premiums in the postmerger years, especially after 1990, using various
definitions of industry specialist. We find, at best, limited support for the presence of industry
leadership premiums. The evidence suggests that after the Big 8/6 audit firm mergers,
some caution is required in generalizing the Craswell, Francis, and Taylor 1995 finding of
national market industry specialist premiums. More generally, the study raises questions about
the tenuous link between the concept of specialization and national market-share statistics.
