Multinational Clients: A Source Of Competitive Advantage For Multinational Audit Firms

Abstract

This research evaluates the competitive advantages of the Big 6 audit firms in selected foreign markets, namely in Malaysia, Hong Kong, and the United Kingdom. In particular, the current study investigates audit pricing for multinational clients headquartered in the above regions.  The analyses consider the degree of multinationality of the client and the locations of multinational clients’ operations in order to gain insight into the determination of audit fees and audit firms’ competitive advantages. The results indicate that audit fee premiums increase as the level of multinationality of the client increases in the Malaysian market, but not in the Hong Kong or UK markets. Also, in Malaysia, the magnitude of the Big 6 audit fee premium increases for clients with subsidiaries in developed countries.  However, in Hong Kong and the United Kingdom, the location of client subsidiaries in developed countries does not provide additional competitive advantages for Big 6 firms.