Year Author(s) Object of the study Sample Methodology Outcome 1986 Palmrose To detect whether the auditor’s size has a systematically correlation with the audit fee. Palmrose believes that a large sized client requires more audit procedure, symbol by a larger audit team. The increased audit effort would push up the audit fee to a higher level. 361 firms from a questionnaire in the U.S.in 1981. Regression model The term LnAssets had a coefficient of .470 which was significant at α = .01. Among the independent variables, the major explanatory variable in the pricing of the audit fee was the clients’ assets. This result is in conformity with the prediction that the size of the audit client is significant positively correlated with the audit fee. 1995 Craswell, Francis & Taylor To investigate whether the audit specialization premium asked are industry-specific. 1484 companies listed on Australia Stock Exchange in 1987 Regression model The auditors of complex industries in comparing with other general industries indeed charge a premium. 1996 Sandra & Patrick To test whether a company with more subsidiaries has more diversified operations hence requiring more hours to complete the audit. 709 firm observations from companies in Hong Kong in 1992 and 1993 Regression model A significant correlation exists between the number of subsidiaries and the audit fee required which suggests that the complexity in the audit pricing process is relevant. 2002 Gul & Lynn To test whether auditors will charge a premium for the potential consequences of client’s litigation risk. 3666 firm-year observation of UK firms which are listed on the U.S. stock exchanges in 1996-1998 Regression model UK auditors indeed charge a higher fee when their non-US oriented clients have accessed the American market. 2004 Casterella, Francis, Lewis, & Walker To prove evidence that small clients are more likely to pay a fee premium for industry specialists than large clients. Information from 651 companies was collected by questionnaire in 2002 Regression model Compare to specialists do require a higher audit fee, and this is only applicable to smaller companies. For large clients, companies not only do not pay an industry premium, in addition their audit fee is relatively less when comparing with
smaller firms. 2005 Lyon & Maher Bribery scandals attract widespread media attention and may harm the reputation of the audit firm. To cover themselves in this situation, auditors may need to spare more efforts in their audit to ensure their opinions about the company are correct. This consequently will drive up the audit fee. 82 companies registered with the SEC in the U.S. in 1974 Regression model Auditors do allege corporate misconduct as risky business, and ask them for a higher audit fee, even though the misconduct is not illegal and does not cause any financial misstatements. 2007 Carson & Fargher To test the assumption that larger clients usually require more specialists to complete an audit engagement consequently increase the audit fee since previous studies have showed that a specialization increases the premium charged. 1712 firm-years between 1994 and 2004 from Australia obtained from Who Audits Australia database. Regression model The clients located in the upper quintiles regarding to firm size requires a significant higher audit fee. One explanation presented by the authors was that since their auditors are designated the industry specialist larger clients are charged with a higher fee. Consequently, the result was in conformity with the prediction that the audit fees are positively correlated with the audit client size. 2013 Bills, Jeter, & Stein To confirm that auditor industry specialization could lead to a decrease in audit fee. 23852 firm-year observation between fiscal years 2004 and 2009 Regression model Industry specialist requires a fee premium for clients from industries, but charged an incrementally lower fee to clients from homogenous industries.