Audit pricing following mergers of accounting practices: evidence from Hong Kong
研究了香港两家会计师事务所合并后审计费用的变化，发现强势品牌审计师的溢价并未完全转移至合并后的新事务所，且不同客户行业表现不同。
Abstract This study investigates what happens to audit fees after audit firms merge. In particular, we examine whether pre-merger fee premiums of the strong brand name auditor spread to the other auditor. Using data from Hong Kong we analyse the 1997 merger between Kwan Wong Tan & Fong (KWTF) and Deloitte Touche & Tohmatsu (DTT) to become DTT, and the 1998 merger between Coopers & Lybrand (CL) and Price Waterhouse (PW) to form PricewaterhouseCoopers (PwC). We find that DTT audit fees are 55% higher than KWTF prior to the merger and this premium falls to 41% in 1998 and to 34% in 1999. However, we find no increase in audit fees for incumbent property company clients, a sector where KWTF is the leading supplier. Prior to its merger. PW earned audit fees 16.4% higher than those earned by CL and the premium is even larger for clients in the consolidated enterprises and property companies sectors. We find no change in audit fees after the PwC merger. This result suggests that the PwC merger is a response to increased competition and clients are unwilling to pay higher fees for within-Big 5 re-branding.