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1、 The Pricing of Audit Services:Theory and Evidence Dan A.Simunic主讲人：付彪IntroductionlThe”Big Eight” firms as a group have been accused of monopolizing the market for audits.However,evidence on the issue is scanty and typically anecdotal.The evidence of the Staff Study itself is limited to concentratio
2、n statistics, with the allegations relying on what has come to be called the “concentration doctrine”.lIn order to test the competitiveness of the audit industry using fee data,it is first necessary to develop a positive model of the process by which audit fees are determined. lA second requirement
3、for testing competition is the identification of a competitive benchmark.The typical approach in the industrial organization literature is to make cross-sectional interindustry comparisons of maket structute with performance . Assumptions of the Fee Determinatian Model lI assume that both the audite
4、e and auditor are risk neutral and seek to maximize their own expected profits each period. Thus, auditee management seeks to maximize the expected profits of the financial reporting entity, while the auditor seeks to maximize the expected profits of the auditing firm.The Auditees Problem When the M
5、arket for Audits Is Competitive An expected profit-maximizing auditee will seek to minimize the expected periodic costs of operating a financial reporting system.Min E(TC)=va+pq+E(d|a,q)(1-E() （1）E（C）=cq+E(d|a,q)E() (2)minE(TC)=va+cq+E(d|a,q)E()+E(d|a,q)(1-E() (3)or simply: mine(TC)=va+cq+E(d|a,q) (
6、4)a=the quantity of resources utilized directly by the auditee in operating the internal accounting system q=the quantity of resources utilized by the auditor in performing the audit exarninatioza v=the per-unit factor cost of internal accounting system resources to the auditee c=the per-unit factor
7、 cost of external audit resources to the auditor, including all opportunity costs and therefore a provision for a normal profit.The Auditees Problem in a Noncompetitve Market Setting lelement of monopoly profit into audit prices. let m represent the amount of monopoly rent included in the unit price
8、 p. The fee schedule of an auditor who was a member of the cartel would be:pq=(c+m)q+E(d|a,q)E()Substituting into equation (1) and simplifying,an auditee would seek tomine(TC)=va+(c+m)a+E(d|a,q)The Effects of Auditor Production Economies on Financial Reporting Systems l While I assume that the facto
9、r casts of resources are uniform to all auditars, the production functions of audit firms may nevertheless differ.in the model production is measured by reduction of expected liability losses. Therefore, allowing for production function differencesimplies that wary across auditors. Effects of Variat
10、ions in Assessed Loss Functions Summary of the Model and Development of the Test for Competition Control Variables for Differences in Loss Exposure From these discussions ,the following general factors were identified as possible determinants of loss exposure:lthe size of the auditeelthe complexity
11、of the auditees operationslauditing problems associated with certain financial statement components,especially inventories and receivableslthe industry of the auditeelwhether the auditee is a publicly or closely held company.Control Variables for Differences in the Assessed Loss-Sharing Ratio l A pl
12、ausible,and probably the only measurable,determinant of E() is evidence of auditor or auditee financial distress Differences in Auditor Production Functions Measurement of the Dependent Variables lThe auditees total observable systems costs consist if the two components,”va” and” pq”.since the audit
13、 fee is a payment made in a market transaction ,measurement of “pq”was relatively straightforward. this element of total cost is demoted by the variable named FEE l I measured “va”using the salaries paid by the auditee to its internal audiors.This element of total cost is denoted by the variable nam
14、ed ICOST. Design and Results of the Survey Test for Nonresponse Bias Test of the Determinants of Audit Fees Using this approach,the result of the first step in the data analysis yielded a regression of lnFEE on lnASSETS of: lnFEE=3.33+0.45(lnASSETS) t=9.1 t=22.7=0.57 N=397 observationsTest of the De
15、terminants of the Sum of Control CostsThe least-aquaresestimates of the coefficients of the variables in the linear regression function:Finally,for the completeness, I display in table 12 the least-squarescoefficient estimates of the variables hypothesized to be determinants of ICOST.The regression function is:Discussion and Interpretation of Results lFindings with respect to the hypothesized control variables are summarized in table 13.The significance tests of the FEE determinants aer from column 2 of table 8,while only those variables whose coef
