Longer term audit costs of IFRS and the differential impact of implied auditor cost structures

Abstract Prior literature finds higher audit fees after the adoption of International Financial Reporting Standards ( IFRS ). We add to this research by documenting that the post‐ IFRS increase in audit fees is persistent, and not a short‐term effect driven by transitional costs. In addition, early adopters have higher audit fees and this difference continues after IFRS adoption. Next, we consider the effect of increased effort required under IFRS on marginal pricing. Our results find lower (higher) marginal pricing post‐ IFRS for PwC and Deloitte ( EY ), suggesting that they have a relatively higher (lower) fixed and lower (higher) variable cost structure.