An empirical test of spatial competition in the audit market

W.A. Numan, M.M.T.A. Willekens

Research output: Contribution to journalArticleScientificpeer-review

155 Citations (Scopus)


This study empirically examines the effects of competition through differentiation on audit pricing. Based on prior economic theory on differentiated-product markets (e.g., Hotelling, 1929; Tirole, 1988), we hypothesize that audit fees are affected by an auditor's relative location in a market segment. We define audit markets per industry segment and U.S. Metropolitan Statistical Area and specify an auditor's industry location relative to the client (auditor–client industry alignment) and relative to the closest competitor (industry market share distance to closest competitor). We find that audit fees increase in both auditor–client industry alignment and industry market share distance to the closest competitor.
Original languageEnglish
Pages (from-to)450-465
JournalJournal of Accounting & Economics
Issue number1-2
Publication statusPublished - 2012


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