Prior studies examining the association between auditor
concentration and intra-industry competition in the
client industry have yielded opposite results. I attempt
to reconcile these findings by using an additional measure
of intra-industry competition (the speed of adjustment
of abnormal profits) and controlling for industry size.
I document a negative association between auditor industry
concentration and intra-industry competition, regardless
of the measure of auditor concentration used. Thus,
although the average level of auditor industry concentration
is generally high, there is some evidence that a more
competitive industry has lower auditor concentration.
Therefore, involuntary audit market changes that reduce
the number of audit firms available, may counter the
effect of client industry competition in limiting auditor