The pricing of assurance services in secondary equity offerings

Neil L. Fargher, Brian W. Mayhew, Michael Wilkins

Research output: Contribution to journalArticlepeer-review

2 Citations (Scopus)


This paper examines the pricing of assurance services in secondary equity offerings (SEOs). Our empirical model extends initial public offering (IPO) fee specifications to include variables that are unique to, or more relevant for, secondary offerings. We document an inverse relationship between SEO fees and a client's ability to delay its secondary offering, suggesting that auditors do not charge as much for SEOs made by relatively mature firms. The relationship reverses, however, when the client is required to use more comprehensive types of filings (i.e., when assurance effort is higher). We also show that fees are higher when the SEO comes to market during the client's annual audit period. This finding is consistent with the shifting of year-end audit fees to SEO engagements in an effort to boost earnings for both clients and auditors (at the expense of shareholders). We cannot, however, unambiguously conclude that fee shifting exists, as the observed fee premium could be explained by other factors.
Original languageEnglish
Pages (from-to)187-207
Number of pages21
JournalJournal of Accounting Auditing and Finance
Issue number3
Publication statusPublished - 2005


  • assurance services
  • going public (securities)
  • fees, professional
  • auditors
  • audit engagements

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