Audit market structure, fees and choice in a period of structural change: evidence from the UK – 1998–2003

This paper presents evidence on audit market concentration and auditor fee levels in the UK market in the crucial period of structural change following the PricewaterhouseCoopers’ (PwC) merger and encompassing Andersen’s demise (1998–2003). Given the current interest in auditor choice, analysis is also undertaken at the individual audit firm level and by industry sector. There is evidence of significant upward pressure on audit fees since 2001 but only for smaller auditees. Audit fee income for top tier auditors (Big 5/4) did not change significantly while the number of auditees fell significantly, consistent with a move towards larger, less risky, clients. A decomposition analysis of the aggregate Big 5/4 concentration ratio changes over the period identifies the impact of four distinct consumer-based reasons for change: leavers; net joiners; non-par auditor switches; and (only for the audit fees measure) audit fee changes. Andersen’s demise markedly reduced the level of inequality among the top tier firms but PwC retained its position as a ‘dominant firm’. On switching to the new auditor, former Andersen clients experienced an initial audit fee rise broadly in line with inflation, with no evidence of fee premia or discounting. They also reported significantly lower NAS fees, consistent with audit firms and auditees responding to public concerns about perceptions of auditor independence. There is no general evidence of knowledge spillover effects or cross-subsidisation of the audit fee by NAS. The combined findings provide no evidence to indicate that recent structural changes have resulted in anticompetitive pricing; the key concerns remain the lack of audit firm choice and issues concerning the governance and accountability of audit firms

The Abdominal Circulatory Pump

Blood in the splanchnic vasculature can be transferred to the extremities. We quantified such blood shifts in normal subjects by measuring trunk volume by optoelectronic plethysmography, simultaneously with changes in body volume by whole body plethysmography during contractions of the diaphragm and abdominal muscles. Trunk volume changes with blood shifts, but body volume does not so that the blood volume shifted between trunk and extremities (Vbs) is the difference between changes in trunk and body volume. This is so because both trunk and body volume change identically with breathing and gas expansion or compression. During tidal breathing Vbs was 50–75 ml with an ejection fraction of 4–6% and an output of 750–1500 ml/min. Step increases in abdominal pressure resulted in rapid emptying presumably from the liver with a time constant of 0.61±0.1SE sec. followed by slower flow from non-hepatic viscera. The filling time constant was 0.57±0.09SE sec. Splanchnic emptying shifted up to 650 ml blood. With emptying, the increased hepatic vein flow increases the blood pressure at its entry into the inferior vena cava (IVC) and abolishes the pressure gradient producing flow between the femoral vein and the IVC inducing blood pooling in the legs. The findings are important for exercise because the larger the Vbs the greater the perfusion of locomotor muscles. During asystolic cardiac arrest we calculate that appropriate timing of abdominal compression could produce an output of 6 L/min. so that the abdominal circulatory pump might act as an auxiliary heart