Partner Familiarity and Audit Fees: Evidence from Former Andersen Clients

In this study we examine the audit fees for two types of former Andersen clients: those that followed their former Andersen partner to a new audit firm and those that did not. Using data from Public Accounting Report on the acquisition of Andersen off ices, we find that about half of the Andersen clients in our sample followed the former partner to a new audit firm and that the "follower" clients paid, on average, about 16 percent lower audit fees than other clients. The results thus provide empirical evidence about the impact of partner-client familiarity on audit fees. The findings also suggest that studies examining former Andersen clients may need to distinguish between the "follower" clients and other clients.