Effect of Audit Market Concentration on Pricing and Audit Quality. Evidence from an Emerging Economy

Abstract

The study investigated the effect of audit market concentration on pricing and audit quality in Nigeria. This study is expected to provide theoretical and empirical implications for audit practitioners and corporate managers as well as provide policy framework for future research, not only in an emerging economy like Nigeria but for globalized viewpoint. Anchored on the structure-conduct-performance theory, the study adopted the quantitative research design. The study’s population was made up of all listed manufacturing firms in Nigeria and used secondary data from annual reports of the surveyed companies for the period 2012 to 2022. Some diagnostics, descriptive and correlation statistics were conducted to examine the behaviour of the data set, while regressions were used to test the hypotheses formulated for the study. Findings of the study showed that audit market concentration increases audit quality and audit fees. The study also found that the positive effect of audit market concentration on audit quality and audit pricing is induced by audit client complexities. The study recommends amongst others that non-Big Four audit firms in Nigeria and other economies should brace up to changes in information and communication technology, and human capital development initiatives to be able to survive in the competitive market for audit services globally.

Keywords

• audit services
• audit market concentration
• audit quality
• audit pricing
• audit client complexity