Competition and Big-Six Brand Name Reputation: Evidence from the Ontario Municipal Audit Market

The 1991 amendment to the auditor appointment requirement of Section 86 of the Ontario Municipal Act removes certain barriers to entry into the Ontario municipal audit market. The purpose of this study is to provide evidence that the amendment has enhanced competition in this market. The results indicate that there is a general reduction in the real municipal audit fees, compared to the pre-amendment levels. However, notwithstanding the heightened competition, the Big-Six audit firms continue to command audit fee premiums over the non Big-Six audit firms. This suggests that Big-Six audit fee premiums possibly reflect brand name reputation rather than monopoly/oligopoly rents.