Auditor Concentration of Listed Public Companies on International Stock Exchanges

This paper explores the concentration of audit services provided to listed public companies on the Stock Exchanges of Canada, Hong Kong, London, and Singapore. The Canadian and London stock exchanges are chosen as representatives of the North American and European markets, while the Hong Kong and Singapore exchanges represent the newly developed Asia Pacific markets. Public accounting firms have benefited from the globalisation trends by expanding their own markets. The reason frequently mentioned for the mergers of the Big 8 accounting firms to form the Big 6 is that they want to increase their international presence and be in a better position to service multinationals in different markets. However, previous studies of concentration of firms in providing auditing services have all been restricted to the USA or individual countries. This study uses both concentration ratios and Herfindahl indices to examine concentration of audit firms in the international stock exchanges. The results indicate a disparate competition amongst the larger firms in each of the Canadian, Hong Kong, London, and Singapore markets. In all of the four markets, the concentration ratios and Herfindahl indices calculated indicate a lack of competition even at the four firm level. This imbalance was very pronounced when the size of the companies audited is considered using their reported total assets. We also present the market shares of the leading six firms in each exchange and discuss some implications of this disparate competition

Perceived Value of Mandatory Audits of Small Companies

As a territory of the UK (until 1 July 1997), Hong Kong followed the UK accounting and auditing standards quite closely, in most cases mirroring the requirements. However, there was a departure regarding the elimination of the statutory audit of small private companies in the UK in 1994, but this was not followed in Hong Kong. An audit is not required for small private companies in the USA either. This study evaluates the perceived value of the small companies’ audit in the opinion of two interest groups that are most affected by this requirement: small private limited companies and small audit firms. Results indicate that both groups of respondents consider the audit to be a valuable experience. While this result is not unexpected from the partners/proprietors of small audit firms, who benefit most from the mandatory audit requirement, it is a surprise from the small companies’ perspective

An International Study of Cross-sectional Variations in Audit Fees

Most previous studies in the market for auditing services and modeling of audit fees have been limited to either a single country (e.g., Johnson et al. 1995) or a single region (e.g., Simon et al. 1992) or a collection across regions (Haskin & Williams 1988). The main studies to examine cross‐country audit fee models are Taylor and Simon (1999) and Wingate (1994). This study extends their previous work by building an audit fees model for 12 countries in Europe, Africa, and Asia. A more comprehensive model is tested which includes the developing stage of the country, (a variable not yet tested) and industry classifications (a variable not tested by most previous studies). Data were compiled from the annual reports published in the International Accounting and Auditing Trends, Fourth Edition (1995) over 1989–1993 by Center for International Financial Analysis and Research (CIFAR). Our results show that, on average, companies in developed countries pay higher audit fees than companies in developing countries. Companies in manufacturing industries for most of the countries studied have the lowest fees charged to them, as compared to the other four industries, presumably because auditors get more training in auditing manufacturing companies than other companies. As in previous studies, our results show that the Big 6 audit firms charge higher fees than non‐Big 6 auditors. The fee premium may be due to the need for quality‐differentiated audits in the emerging capital markets, or due to the brand name reputation enjoyed by the Big 6

A Comparison of Business Management Characteristics in U.S., German, and Japanese Manufacturing Corporations

Comparing the management characteristics of business firms in different countries has been a popular research topic in business administration. In this paper, we compare the management characteristics of U.S., German, and Japanese manufacturing corporations. The findings of our study can provide valuable insights for corporate managers and global investors. We find that U.S. manufacturing corporations have the lowest liquidity risk (i.e., U.S. manufacturing firms have higher liquidity levels) compared with German and Japanese manufacturing corporations. German manufacturing corporations have the highest bankruptcy risk (i.e., German manufacturing firms have higher liability levels) compared with U.S. and Japanese manufacturing corporations. The average collection period of accounts receivable and the average payment period of accounts payable are significantly shorter in U.S. manufacturing corporations compared with their German and Japanese counterparts. Due to the extensive use of the just-in-time inventory management system in Japanese Keiretsu industry groupings, Japanese manufacturing corporations have higher inventory turnover rates (i.e., Japanese manufacturing corporations carry lower inventory levels) compared with U.S. and German manufacturing corporations. U.S. manufacturing corporations are able to earn higher operating profit margins compared with their German and Japanese counterparts because they are able to charge higher product prices to customers and/or they are able to have lower manufacturing costs. Japanese manufacturing corporations have the lowest annual sales and total assets growth rates compared with U.S. and German manufacturing corporations