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An analysis of UK Andersen clients pre- and post Andersen demise: where have they gone and did they pay more?
Ilias G Basioudis,
Aston University
Maria Papadimitriou, Aston University
ABSTRACT. AA’s listed clients needed new auditors quickly after the indictment of Andersen (AA) in 2002. In this paper we examine the new auditor selection of former AA clients in the UK and whether they went on to pay significantly more or less to their new auditors in 2002 relative to 2001. Although Deloitte captured about 79% of former AA clients, it was E&Y that gained the bigger former AA clients (based on 2001 mean client sales) and the biggest increase in audit fee rate (35.8%) from former AA clients. The results also indicate a significant average growth in both audit (10%) and non-audit fees (25%) but this is not pervasive across the Big 4 firms. Further, all audit firms increased their audit fees by about 6%, and decreased non-audit fees by about 7% (as a percentage of total fees) in 2002 relative to 2001. Despite the absolute increase in audit fees, further econometric analysis reveals that the UK market experienced no changes in inflation adjusted audit fees between 2001 and 2002.
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