Doctor of Philosophy (PhD)



Document Type



This paper examines the relationship between audit quality and several measures of spatial competition. Spatial competition is measured as the smallest absolute difference in audit fee market shares from an audit firm and its closest competitor. In this paper, spatial competition measures are referred to as competitive distances, and they are calculated within the large audit market (Big 4 only), within the small audit market (non-Big 4 only), and between the large and small audit markets. Audit market competition and its effect on audit quality has been an ongoing debate. On one side of the argument, competition may negatively impact audit quality. Increased competition leads to higher likelihood of auditor switching, so auditors compete for client retention by showing more leniency in their audits and by decreasing audit fees. On the other hand, more competition leads to audit innovations, more efficient and effective audits, and higher audit quality. Lastly, competition may not influence audit quality due to the sufficient nature of market-based institutional incentives such as litigation risk, reputation loss, and regulatory compliance. Thus, it is unclear the effect that audit market competition has on audit quality. This study finds that local-industry competition for both large and small audit firm markets does not influence audit quality in the majority of the test settings. This study may be of interest to companies choosing an auditor and to regulators, who have expressed concerns over competition and concentration levels within the audit markets.



Committee Chair

Moffit, Jackie



Included in

Accounting Commons