IDEAS home Printed from
   My bibliography  Save this article

The effects of advertising and solicitation on audit fees


  • Hay, David
  • Knechel, W. Robert


Leading academic and professional accountants have suggested that the crisis in auditing over the past few years may have had its origin in deregulation which allowed firms to advertise their services and solicit new clients, encouraging accounting firms to become more commercial. In this paper, we look at this issue in New Zealand which has the unique distinction of having separated two key forms of deregulation, namely advertising and solicitation, by 6Â years. This allows us to separately examine the effect of each form of market competition on audit fees. We find that advertising is associated with increases in fees, not decreases, which suggests that quality-based advertising took place, and not price-based advertising. In contrast, solicitation corresponded with a general decrease in average fees for clients of the Big 8. We interpret this result as indicating an increase in competition among accounting firms. Our results suggest that there may be a much more complex relationship among market competition, advertising and solicitation, and fees than the arguments used to originally justify deregulation.

Suggested Citation

  • Hay, David & Knechel, W. Robert, 2010. "The effects of advertising and solicitation on audit fees," Journal of Accounting and Public Policy, Elsevier, vol. 29(1), pages 60-81, January.
  • Handle: RePEc:eee:jappol:v:29:y::i:1:p:60-81

    Download full text from publisher

    File URL:
    Download Restriction: Full text for ScienceDirect subscribers only

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


    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.

    Cited by:

    1. repec:eee:jiaata:v:29:y:2017:i:c:p:103-117 is not listed on IDEAS
    2. Gholamhossein Mahdavi & Abbas Ali Daryaei, 2016. "Auditing marketing and corporate governance," International Journal of Business Forecasting and Marketing Intelligence, Inderscience Enterprises Ltd, vol. 2(3), pages 190-214.
    3. Su, Xijia & Wu, Xi, 2017. "Public Disclosure of Audit Fees and Bargaining Power between the Client and Auditor: Evidence from China," The International Journal of Accounting, Elsevier, vol. 52(1), pages 64-76.
    4. repec:bla:acctfi:v:57:y:2017:i:3:p:657-679 is not listed on IDEAS
    5. Najihah Yaacob & Ayoib Che-Ahmad, 2012. "Audit Fees after IFRS Adoption: Evidence from Malaysia," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 2(1), pages 31-46, June.
    6. Lennox, Clive & Li, Bing, 2012. "The consequences of protecting audit partners’ personal assets from the threat of liability," Journal of Accounting and Economics, Elsevier, vol. 54(2), pages 154-173.


    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:eee:jappol:v:29:y::i:1:p:60-81. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Dana Niculescu). General contact details of provider: .

    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 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.

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

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.