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Auditing, Consulting, and Audit Market Concentration

Author

Listed:
  • Christopher Bleibtreu

    (Department of Economics, University of Konstanz, Germany)

  • Ulrike Stefani

    (Department of Economics, University of Konstanz, Germany)

Abstract

In its recently published Green Paper, the European Commission 2010 discusses various methods to enhance the reliability of audits and to re-establish trust in the financial market. The Commission primarily focuses on increasing auditor independence and on reducing the high level of audit market concentration. Based on a model in the tradition of the circular market matching models introduced by Salop 1979, we show that prohibiting non-audit services as a measure intended to improve auditor independence can have counter-productive secondary effects on audit market concentration. In fact, our model demonstrates that incentives for independence and the structure of the audit market are simultaneously determined. Because market shares are endogenous in our model, it is not even clear that prohibiting non-audit services indeed increases an auditor’s incentive to remain independent.

Suggested Citation

  • Christopher Bleibtreu & Ulrike Stefani, 2011. "Auditing, Consulting, and Audit Market Concentration," Working Paper Series of the Department of Economics, University of Konstanz 2011-28, Department of Economics, University of Konstanz.
    • Handle: RePEc:knz:dpteco:1128
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    File URL: http://www.uni-konstanz.de/FuF/wiwi/workingpaperseries/WP_28-11-Bleibtreu_Stefani.pdf
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    References listed on IDEAS

    as
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    4. Chee‐Yeow Lim & Hun‐Tong Tan, 2008. "Non‐audit Service Fees and Audit Quality: The Impact of Auditor Specialization," Journal of Accounting Research, Wiley Blackwell, vol. 46(1), pages 199-246, March.
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    More about this item

    Keywords

    auditing; Audit Fees; Knowledge Spillovers; Audit Market Concentration; Auditor Independence;
    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

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