Researcher ORCID Identifier

0009-0002-8600-6798

Graduation Year

2026

Date of Submission

12-2025

Document Type

Open Access Senior Thesis

Degree Name

Bachelor of Arts

Department

Economics-Accounting

Reader 1

Andrew Finley

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Terms of Use for work posted in Scholarship@Claremont.

Abstract

This paper examines whether audit firms reprice clients that are not under Securities and Exchange Commission (SEC) review when a greater share of the auditor’s other clients face SEC scrutiny. Results indicate economically meaningful pricing spillovers. In the full sample, a ten-percentage-point increase in auditor-level exposure is associated with approximately 2% higher fees for non-scrutinized clients. The effect is stronger for Big Four networks: the Big Four slope is about 3.6% per ten points, and a Big Four only replication yields roughly 8.9%. Among Big Four, measuring exposure at the signing-office level also produces a positive but smaller association (~0.4% per ten points), consistent with local review culture contributing to, yet not fully explaining, network-wide responses. The evidence supports audit-pricing theory in which expected effort and loss exposure rise when regulators scrutinize peers, prompting portfolio-wide methodology tightening and higher fees. The findings inform investors and managers about fee dynamics beyond client-specific risk, and suggest that SEC review intensity can propagate system-wide through audit firms’ pricing.

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