Audit Firm’s Capacity, Opportunity Costs and Audit Pricing.

• In Event: Audit Office Resources and Control Issues in Audit

Abstract

Resorting to the economic concept, we investigate whether varying opportunity costs caused by varying unused capacity caused by normal audit tasks will affect the pricing of audit fees. The empirical results verify that unused capacity is negatively associated with audit fees, no matter for the Big 4 or Non-Big 4 city offices. Furthermore, the association is magnified when facing higher competition. We also find that the negative association is driven by small- and medium-size city offices, which may indicate that larger city offices may be more reluctant to consider unused capacity when pricing audit fees or have better abilities to manage unused capacity caused by normal audit tasks.

Authors

• TsingZai C. Wu, Asia University and National Cheng Kung University

• Hua-Wei Huang, National Cheng Kung University

• Chun-Chan Yu, National Cheng Kung University