Joint Audit, Audit Market Structure, and Consumer Surplus
We use a structural application of the discrete choice model to investigate how the introduction of a joint audit policy would affect audit market structure and consumer surplus. We perform this policy evaluation by identifying demand fundamentals in a joint audit regime and applying them to a single audit regime. We find that a joint audit requirement has the potential to change the audit market structure substantially but that the effects are sensitive to the specific policy design. For example, small audit firms gain market share in a joint audit regime but only if an equal sharing of the workload between the two joint auditors is not required. Our counterfactual analysis reveals that th…
The Value of Auditor Industry Specialization: Evidence from a Structural Model
ABSTRACT This study investigates the value of auditor industry specialization. In the first step, we use a discrete choice model to derive the first-order demand for auditor industry specialization. Our results reveal that clients have a general preference for auditor industry specialization, relating to both audit firm and audit office specialization. We observe that specializations at the audit firm and audit office level are substitutes. We also find that larger, more complex clients have a stronger demand for industry specialization at the audit office level. In the second step, we use the results from the discrete choice model to quantify the value of auditor industry specialists for c…