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On the persistence and dynamics of Big 4 real audit fees: evidence from the UK

Kacer, Marek, Peel, David A., Peel, Michael J. and Wilson, Nicholas 2018. On the persistence and dynamics of Big 4 real audit fees: evidence from the UK. Journal of Business Finance and Accounting 45 (5-6) , pp. 714-727. 10.1111/jbfa.12310

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Despite the huge audit pricing literature, there is a dearth of evidence on the temporal dynamics of audit fee adjustments and the persistence of audit fees. Based on a sample of 76,867 panel observations for a sample of UK companies audited by the Big 4 over the period 1998 to 2012, we employ consistent lagged dependent variable panel estimators to provide new evidence on the persistence and dynamics of real Big 4 audit fees. Contrary to extant research, which assumes that audit fees adjust immediately in a single period, our empirical results indicate that Big 4 real audit fees are persistent, being partly dependent on their previous realisations. We conclude that static audit fee models omit a potentially important temporal dimension of audit pricing behaviour and that further research is warranted into dynamic audit fee models across other jurisdictions.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Publisher: Wiley
ISSN: 0306-686X
Date of First Compliant Deposit: 21 December 2017
Date of Acceptance: 18 December 2017
Last Modified: 20 Jan 2021 13:12

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