An International Meeting of the American Accounting Association American Accounting Association 2006 Annual Meeting August 6–9, 2006 Washington, D.C.

Randal J. Elder
Syracuse University

Laurence E. Johnson
Colorado State University

Suzanne Lowensohn
Colorado State University

Abstract: Recent changes to government audit procurement practices in Florida have been associated with reduced audit fees (Jensen and Payne 2005b) and coincide with improved audit quality and an increased presence of specialized audit providers (Lowensohn and Reck 2004) in the Florida government audit market. We examine auditor specialization in the Florida government audit market and study the effect of specialization on perceived governmental audit quality, finance director satisfaction with their auditors, and audit fees. We survey 286 finance directors of local Florida governments and find that non-Big 5 specialists are associated with higher audit quality and higher levels of satisfaction, but do not receive higher audit fees. In contrast, Big 5 auditors charge higher audit fees but are associated with lower perceived audit quality and lower satisfaction. Our findings indicate that local governments may benefit from the engagement of non-Big 5 specialist auditors.

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