Presents a study to determine whether real audit fees decreased between 1977 and 1981. Behavior of audit fees during a period of apparent increasing competition in the market for independent audit services; Method of study; Claims of increasing fee competition in the market for independent audit services.

The article comments on the paper "The Contingency Theory of Managerial Accounting," by David C. Hayes. The intent and implications of Hayes's research were to provide a sufficiently rich description of organizational subunit performance so as to permit a delineation of the factors which cause certain costs to occur. Once the causal factors of cost have been determined, controllability can be more clearly defined and responsibility for the causal factors can be assigned to individuals within the organization who have control over them. The major contingencies associated with departmental effectiveness in Hayes's assessment model are: organizational subunit interdependence, subunit environmental relationships, and factors internal to the subunit of interest. In describing these model dimensions, Hayes states that the nature of departmental interdependence varies with organizational complexity and may be classified as either stable pooled, sequential, or reciprocal. Unfortunately, the nature of the contingency dimensions is ignored by Hayes in stating his propositions and in conducting and analyzing his empirical research.

Comments on a study which used the decision style model of cognitive complexity to test whether complex integrative decision styles prefer more complex information input and use more information in decision making than cognitively low decision styles. Inconsistencies in the interpretations of results; Flaws in the empirical equivalents used.

[This study describes the behavior of audit fees during a period of apparent increasing competition in the market for independent audit services. Academic researchers (e.g., Danos and Eichenseher 1986; Kinney 1988) and the business press (e.g., Journal of Accountancy 1984; The Wall Street Journal 1985, 1987; Work 1985) have noted increasing competition in the market for audit services among public accounting firms, but there has been no documentation that audit fees have decreased. The purpose of this study is to determine whether real audit fees decreased between 1977 and 1981. This interval started with federal investigations of anticompetitive behavior in the accounting profession, included several changes in the accounting profession that, coupled with the economic downturn of the late 1970s and early 1980s, could have increased competition in the market for audit services. It ended after the Federal Trade Commission announced it was closing its investigation of the profession's anticompetitive rules because many of the restrictions against competition had been dropped (The Wall Street Journal 1980). The study sample was developed from a set of publicly traded companies reporting external audit fees in a University of Michigan database. Of the 98 companies reporting these data for 1977 and 1981, the two years of interest, 20 were excluded to minimize the potential confounding effects of major changes in internal auditing, the impact of auditor turnover, and changes in regulation of the banking industry on external audit fees. The study finds a significant decrease in real audit fees between 1977 and 1981. These findings were not sensitive to alternative specifications of the audit fee model and were not driven by any particular industry or audit firm. The results of this study are consistent with claims of increasing fee competition in the market for independent audit services. In view of the number of changes occurring in the audit profession and the market during that period, it is difficult to make causal inferences about the effects of particular changes in the profession on audit fees. Thus, this article should be viewed as a descriptive study of the behavior of audit fees in a time when the market for audit services was allegedly becoming more competitive.]