Research Archive

Public Equity and Audit Pricing in the U.S.

Brad Badertscher, Bjorn Jorgensen, Sharon Katz, William Kinney

Publication type: Journal article

Research Archive Topic: Accounting


To what degree are audit fees for U.S. firms with publicly traded equity higher than fees for otherwise similar firms with private equity? The answer is potentially important for evaluating regulatory regime design efficiency and for understanding audit demand and production economics. For U.S. firms with publicly-traded debt, we hold constant the regulatory regime, including mandated issuer reporting and auditor responsibilities. We vary equity ownership and thus public securities market contextual factors, including any related public firm audit fees from increased audit effort to reduce audit litigation risk and/or pure litigation risk premium (litigation channel effects). In cross-section, we find that audit fees for public equity firms are 20% to 22% higher than fees for otherwise similar private equity firms. Time-series comparisons for firms that change ownership status yield larger percentage fee increases (decreases) for those going public (private). Results are consistent with litigation channel effects giving rise to substantial incremental audit fees for U.S. firms with public equity ownership.


Badertscher, Brad, Bjorn Jorgensen, Sharon Katz, and William Kinney. "Public Equity and Audit Pricing in the U.S." Journal of Accounting Research 52, no. 2 (2014): 303-339.

Each author name for a Columbia Business School faculty member is linked to a faculty research page, which lists additional publications by that faculty member.

Each topic is linked to an index of publications on that topic.