Graduation Year

2026

Date of Submission

12-2025

Document Type

Open Access Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics-Accounting

Reader 1

Ananda Ganguly

Abstract

ASC 606 is an accounting standard issued in May 2014 that fundamentally changed how firms identify performance obligations and recognize revenue. The standard requires a five-step framework that links recognition to the timing of customer contract satisfaction. Software-as-a-Service (SaaS) firms were uniquely affected by this standard due to subscription-based pricing models and multi-element contracts that make revenue recognition more complex. For this thesis, I estimate the impact of adopting ASC 606 on SaaS firm audit fees. I hypothesize that more complex revenue recognition results in more complex audit procedures and, hence, higher fees. I use a Differences-in-Differences (DiD) regression model that compares changes in audit fees between SaaS and non-SaaS technology firms before and after firm-specific adoption years (2017 or 2018). My sample comprises 102 publicly traded U.S. technology firms between 2014 and 2020, particularly ones with greater exposure to SaaS-style revenue models. The key explanatory variable, SaaS intensity, is computed by taking the three-year median of each firm’s standardized deferred revenue ratio pre-ASC 606. The results indicate that SaaS-intensive firms experienced modestly higher (≈2%) audit fees after ASC 606 adoption, though the effects are economically small and not statistically significant. Additionally, the sensitivity of audit fees to client-specific factors somewhat changed after adoption, but the results were statistically insignificant. Lastly, the study finds that variance in audit fees moderately increased (≈14%) for SaaS-intensive firms post-ASC 606, but the outcome was again not statistically significant.

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