The effect of supply chain knowledge spillovers on audit pricing

Jengfang Chen, Hsihui Chang, Hsin-Chi Chen, Sungsoo Kim

Research output: Contribution to journalArticle

4 Citations (Scopus)

Abstract

We present evidence on the effect of audit firms' supply chain knowledge spillover on audit pricing. Analyzing data from Audit Analytics and Compustat for the seven-year period from 2003 to 2009, we find that audit firms' supply chain knowledge has a negative effect on audit fees. Specifically, an audit firm with more supply chain knowledge charges lower audit fees to its clients when the firm also audits its clients' major buyers. In addition, we find that the fee discount is greater when the audit firm possesses major buyer-related supply chain knowledge at the office level compared to the national level. Our findings are consistent, albeit weaker, to an expanded sample of companies that voluntarily disclose their major buyers.
Original languageEnglish
Pages (from-to)83-100
JournalJournal of Management Accounting Research
Volume26
Issue number1
DOIs
Publication statusPublished - 2014
Externally publishedYes

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