IDEAS home Printed from https://ideas.repec.org/a/spr/reaccs/v29y2024i2d10.1007_s11142-022-09734-9.html
   My bibliography  Save this article

The interdependence between market structure and the quality of audited reports: the case of non-audit services

Author

Listed:
  • Christopher Bleibtreu

    (BI Norwegian Business School)

  • Ulrike Stefani

    (University of Konstanz)

Abstract

This paper addresses the effects of a prohibition of providing non-audit services (NAS) to audit clients. By combining a strategic auditor–client game with a circular market-matching model that has an endogenous number of auditors, we take into account the interdependence between the auditors’ and clients’ incentives, the market structure, and the quality of audited reports. We show that the regulation’s effects depend on the preexisting audit market concentration and the types of blacklisted NAS. In sharp contrast to the effects that regulators desire, a prohibition of providing NAS to audit clients can further increase audit market concentration and decrease the quality of audited reports if the fees that auditors previously earned from providing the blacklisted NAS were relatively high, compared to the reduction in audit costs that result from spillovers. In contrast, a prohibition of the NAS that generate intense spillovers and low NAS fees can have the unexpected—but desired—effect of decreasing market concentration; however, reporting quality also decreases.

Suggested Citation

  • Christopher Bleibtreu & Ulrike Stefani, 2024. "The interdependence between market structure and the quality of audited reports: the case of non-audit services," Review of Accounting Studies, Springer, vol. 29(2), pages 1524-1574, June.
    • Handle: RePEc:spr:reaccs:v:29:y:2024:i:2:d:10.1007_s11142-022-09734-9
    DOI: 10.1007/s11142-022-09734-9
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11142-022-09734-9
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s11142-022-09734-9?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item

    Keywords

    Audit market concentration; Audit market regulation; Circular market-matching model; Financial reporting quality; Non-audit services; Spatial competition;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:reaccs:v:29:y:2024:i:2:d:10.1007_s11142-022-09734-9. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.