The effect of audit firm size on audit prices

Research output: Contribution to journalArticle

Abstract

In a recent issue of Journal of Accounting and Economics, Francis,1 1 The authors are indebted to Francis for his contributions to this study. developed a theory for determining the effect of audit firm size on audit prices (EAFSA). The present study offers an extension to his multivariable theory, which is otherwise viewed as an excellent attempt at presenting a realistic model of EAFSA. Further analysis of the data included in the present paper ranks the dominant variables and factors as (1) External audit fee (AFE), and Percentage of Assets (AST), and (2) Loss in last three years (LLS). In addition, this analysis reduces the multicollinearity and data redundancy of the original 11 variables by creating 6 less redundant factors from them. These new factors yield a EAFSA model of measurement with a fewer number of terms, a lower multicollinearity, and a multivariate normal distribution. The variable entitled Return on Investment (ROI) is ranked as the most subordinant, and most dependent, while (AFE) is ranked as the most dominant variable.

Original languageEnglish (US)
Pages (from-to)511-520
Number of pages10
JournalOmega
Volume18
Issue number5
DOIs
StatePublished - 1990

Keywords

  • audit fees
  • audit firm size
  • audit prices
  • auditing
  • auditors
  • external audit fee

ASJC Scopus subject areas

  • Strategy and Management
  • Management Science and Operations Research
  • Information Systems and Management

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