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This study investigates audit pricing and the provision of non-audit services in light of the credence nature of auditing. We use the German private client setting in which we assume the impact of auditor reputation to be limited. Thus, we examine a low litigious audit environment with a relatively equal distribution of Big 4 and non-Big 4 audit clients. Controlling for endogeneity, Big 4 auditors do not succeed in gaining a general audit fee premium. The positive association between non-audit and audit fees suggests a higher value of the joint provision of audit and non-audit services, consistent to differing benefits from the statutory audit and client-specific non-audit services for the audit client. Thereby, Big 4 auditors are associated with higher non-audit fees. Further analysis reveal differentiated effects on audit pricing in line with the German audit market structure. Our findings contribute to the understanding of the inherent characteristics of auditing and their implications on audit pricing and the provision of non-audit services.
Nicole V.S. Ratzinger-Sakel, Universität Ulm
Martin W. Schönberger, Ulm University, Institute of Accounting and Auditing