Auditor industry specialisation, service bundling and partner effects in a mining-dominated city

Ferguson, Andrew, Pundrich, Gabriel and Raftery, Adrian 2014, Auditor industry specialisation, service bundling and partner effects in a mining-dominated city, Auditing: a journal of practice and theory, vol. 33, no. 3, pp. 153-180.

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Title Auditor industry specialisation, service bundling and partner effects in a mining-dominated city
Author(s) Ferguson, Andrew
Pundrich, Gabriel
Raftery, AdrianORCID iD for Raftery, Adrian orcid.org/0000-0001-6281-1667
Journal name Auditing: a journal of practice and theory
Volume number 33
Issue number 3
Start page 153
End page 180
Total pages 28
Publisher American Accounting Association
Place of publication Sarasota, Florida
Publication date 2014-08
ISSN 0278-0380
Keyword(s) audit fees
industry specialisation
service bundling
non-audit services
second-tier firms
mining industry
Summary This study examines auditor industry specialisation effects in Perth, a remote mining town in Australia characterised by a large number of small, homogeneous firms. We consider the impact of leadership by the non-Big 4 auditor BDO Kendalls (BDO) for a sample of 371 mining development stage entities (MDSE's). After controlling for factors known to determine audit fees, we find no evidence of auditor industry leadership fee premiums accruing to (BDO), a result robust to a range of sensitivity tests including the broadening of tests Australia-wide. However, when the dependent variable is redefined to the total 'bundle' of services provided by the audit firm (including audit and non-audit fees), the industry leader is shown to earn a fee premium suggesting BDO uses audits as a conduit to supply higher margin non-audit services. Our findings suggest that strategic pricing by industry leaders may not be confined to Big 4 firms.
Language eng
Field of Research 150102 Auditing and Accountability
Socio Economic Objective 840299 Primary Mining and Extraction of Mineral Resources not elsewhere classified
HERDC Research category C1 Refereed article in a scholarly journal
Copyright notice ©2014, American Accounting Association
Persistent URL http://hdl.handle.net/10536/DRO/DU:30061861

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