The Effects of Supply-Chain Knowledge Spillover on Audit Pricing

This study examines the effects of auditors' supply-chain knowledge spillover on audit pricing. Analyzing data from audit analytics for the period from 2003-2009, we find that an auditor with supply-chain knowledge offers reduced audit fees. Specifically, the auditor with joint supplier-buyer-related knowledge and buyer-related knowledge discounts its audit fees, but not with supplier-related knowledge alone. The fee discount is larger when the auditor has supplier-chain knowledge at the office level than when the auditor has such knowledge at the audit firm level. Our findings are robust to the use of alternate measures of supply-chain knowledge as well as the analysis of the restricted sample comprising only supply chain companies