1. Corporate Governance and Financial Reporting Research
Discussion of “Auditor Industry Specialization, Client Bargaining Power, and Audit Pricing” by Casterella et al. (2004) AJPT

2. Purpose of the Paper
To examine whether auditor industry specialists charge higher audit fees. Theoretical support: Porter’s (1985) differentiation strategy

3. Motivation & Contribution
I. Motivation: No prior US studies (before 2004) documented auditor industry specialization premiums exist II. Contribution: documented auditor specialist fee premiums to support Porter’s theory – audit pricing is affected by industry specialization and client’s bargaining power.

4. Sample Data and Method
I. Sample Data: 651 non-financial firms with audit fee data from a survey in II. Regression model is used: Audit Fee = controls + Specialist + Power (T4) Specialist is measured by auditor market share based on clients’ revenues in an industry

5. Results/Conclusion
Table 4: Specialist 0.053, p=0.09 Power , p=0.02

6. Extension
I. Specialist effects in other accounting fields; II. Power effects in other accounting fields; III. Post-SOX research; IV. Local applications.