Audit Pricing in the Pension Plan Audit Market

The economic determinants of audit fees have been examined extensively among public companies, both in the US (e.g. Simunic, 1980; Gist, 1992) and internationally (e.g. Anderson and Zhégal, 1994). These studies have been based on audits of publicly-traded firms, which were surveyed to determine the audit fees. In the US pension plan audit market, audit fees are publicly disclosed, eliminating the potential for response bias present in most other audit fee studies. Additionally, unlike the public company audit market, the pension plan audit market is not dominated by the Big Six accounting firms, and audit fees in the pension plan audit market are smaller than in the public company audit market. This study examines the generalisability of the audit fee model by applying the model in the pension plan audit context. In accord with other audit fee studies, results indicate that client characteristics, including client size and risk, are associated with pension plan audit fees. In contrast with other studies, findings regarding market factors do not suggest a difference in fee structures between Big Six and non-Big Six firms, and the results indicate that auditor changes do not affect pension plan audit fees.