The relationship between the number of branches of audit firms and audit market competition

Purpose The purpose of this study is to evaluate the relationship between the number of branches of auditing firms and the level of competition in the audit market. Furthermore, considering the theoretical framework and prior research on the mergers of auditing firms, this study investigates the impact of such mergers on the primary hypothesis to determine how mergers influence the relationship between branch count and market competition. Design/methodology/approach The collected data were categorized using Microsoft Excel and analyzed using STATA statistical software. The spatial scope of the study comprised all auditing firms registered with the Iranian Association of Certified Public Accountants. The temporal scope spanned from 2015, marking the occurrence of the first mergers, to 2022. Changes in the number of branches and other control variables were examined within this period. Findings The results indicate a positive and significant relationship between the number of branches of audit firms and audit market competition, as measured by the Herfindahl–Hirschman Index (HHI) and the Entropy Index. Both indicators demonstrated that increased auditing firms’ branches lead to heightened competition in the audit market. Moreover, the findings confirmed that the mergers of auditing firms also influence the relationship between branch count and market competition. Originality/value Based on the theoretical framework and previous studies, researchers and policymakers have recognized the significance of healthy competition in improving the quality of services and products such as audit reports. Historically, special attention has been devoted to fostering competition in the audit market.