Download or read book How Big 4 Firms Improve Audit Quality written by Limei Che and published by . This book was released on 2019 with total page 49 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper studies whether and how Big-4 firms provide higher quality audits than non-Big-4 firms. Specifically, we first examine a Big-4 effect and then explore three sources of the Big-4 effect. To test the Big-4 effect, we use a unique dataset of individual audit partners for a large sample of private companies and employ a novel research design exploiting the fact that auditees may follow the auditor who switches affiliation from a non-Big-4 to a Big-4 firm. Thus, we compare audit quality and audit fees of the same partner-auditee pairs before and after the switch. The results show that the Big-4 effect exists in the private-firm segment. More importantly, we find evidence for three sources of the Big-4 effect. First, Big-4 firms are able to recruit non-Big-4 partners who deliver higher audit quality than other non-Big 4 partners in the pre-switch period. Second, enhanced learning has taken place after the switch. Third, the increased audit quality can also be attributed to stronger incentives/monitoring. These are new findings to the literature.

Download or read book Disruption in the Audit Market written by Krish Bhaskar and published by Routledge. This book was released on 2019-04-16 with total page 117 pages. Available in PDF, EPUB and Kindle. Book excerpt: Focussing on the dominance of the Big Four auditing firms – PwC, EY, Deloitte and KPMG – this concise volume provides an authoritative critical assessment of the state and future of the audit market, currently the subject of much debate and the focus of significant government enquiries. Drawing on extensive research and a vast collection of evidence from interviews with insiders, experts and users, it explores the key issues of audit quality, independence, choice and the growing expectation gap. Just as disruptive technologies are overturning other established sectors, this book explores their impact on accounting, financial reporting and auditing. It questions whether the Big Four-dominated audit market is prepared not only for the inevitable disruption of new technologies, but also the challenges of negative public perceptions, cynicism about regulation and demands for greater transparency. In the context of increasing high-profile corporate failures, this book provides a compelling scrutiny of the industry’s failings and present difficulties, and the impact of future disruption. At this crucial time, it will be of great interest to students, researchers and professionals in accounting and auditing, as well as policy makers and regulators.

Download or read book Audit Quality written by Jonas Tritschler and published by Springer Science & Business Media. This book was released on 2013-10-31 with total page 251 pages. Available in PDF, EPUB and Kindle. Book excerpt: Arising from the author’s experience as a practicing CPA, this book is quite different from other research in this field, as it confronts the subject of audit quality from a pragmatic perspective. The first goal of Jonas Tritschler is to develop an audit quality metric on national audit firm level. Financial reporting errors, as detected by the German enforcement institutions during examinations, which subsequently are published in the German Federal Gazette by the involved companies, are the data basis for this measurement. Using the developed audit quality metric, the second goal of this study is to analyze audit quality differences of selected audit firms by comparing their deployed audit input factors such as employee’s competence (ratio of certified professionals to total audit staff), experience of employees (average tenure of employees in years) and client-specific experience (client fluctuation rate). Results indicate a correlation between audit quality according to the developed metric and the operationalized audit input factors mentioned above.

Download or read book Public Accounting Firms written by Jeanette M. Franzel and published by DIANE Publishing. This book was released on 2004-03 with total page 102 pages. Available in PDF, EPUB and Kindle. Book excerpt: Following major failures in corp. financial reporting, the Sarbanes-Oxley Act of 2002 was enacted to protect investors through requirements intended to improve the accuracy and reliability of corp. disclosures and to restore investor confidence. The act strengthened auditor independence and improved audit quality. Mandatory audit firm rotation (setting a limit on the period of years a public accounting (PA) firm may audit a particular company's financial statements) was considered as a reform to enhance auditor independence and audit quality during the hearings that preceded the act, but it was not included in the act. This report studies the potential effects of requiring rotation of the PA firms that audit public companies registered with the SEC.

Download or read book Judgment and Decision Making Research in Accounting and Auditing written by Robert H. Ashton and published by Cambridge University Press. This book was released on 1995-09-29 with total page 311 pages. Available in PDF, EPUB and Kindle. Book excerpt: A timely and comprehensive study on behavioural decision-making within the field of accounting.

Download or read book Why and How Audits Must Change written by Thomas P. Houck and published by John Wiley & Sons. This book was released on 2003-07-25 with total page 243 pages. Available in PDF, EPUB and Kindle. Book excerpt: Here are the essential steps that accounting firms must take to improve audit quality. The author provides detailed coverage of important topics such as risk-based auditing techniques, analytical procedures, technology, and internal controls. After explaining why frequently used audit approaches are inadequate for detecting material fraud, the author: Provides specific and practical guidance to help auditors conduct higher quality audits Offers guidance to financial executives on ways to evaluate their independent audits Describes the steps that accounting firms must take to implement these much-needed changes Order your copy today!

Download or read book Is Audit Quality Different for Big 4 and Mid tier Auditors written by and published by . This book was released on 2009 with total page 45 pages. Available in PDF, EPUB and Kindle. Book excerpt: "Prior research suggests that Big 4 auditors provide higher quality audits by virtue of their large size. Still, the recent reforms mandated by the Sarbanes Oxley Act -- by increasing client and auditor incentives for accurate reporting -- may have narrowed audit quality differences across auditor groups. In this paper, we examine audit quality for Big 4 and Mid-tier auditors during 2003-06 and include clients of other smaller audit firms for comparison purposes. We examine actual audit quality (as proxied by earnings management metrics) as well as perceived audit quality (as proxied by the client- and year-specific eloading and ex ante equity risk premium metrics). We include in our analysis only those Big 4 clients for whom the Mid-tier firms are potentially viable as auditors. Relative to other smaller audit firm clients, we find Big 4 and Mid-tier audit clients to have (1) lower levels of accrual management, (2) higher levels of real earnings management, and (3) higher levels of investor-perceived accruals quality. In each case, we were unable to reject the null that Big 4 and Mid-tier audits are similar. However, we find Big 4 audit clients to have a lower client-specific ex ante equity risk premium relative to both Mid-tier and other smaller audit firm clients. Collectively, our findings indicate that in situations where a Mid-tier auditor is potentially viable, Big 4 clients could utilize a Mid-tier firm without adversely affecting audit quality. Still, the results suggest that Big 4 clients have a lower ex ante cost of equity capital which is likely related to the insurance considerations ("deep pockets") -- rather than the audit quality -- associated with having a Big 4 auditor."

Download or read book Product Differentiation in Auditing written by Dan A. Simunic and published by Canadian Certified General Accountants' Research Foundation = Fondation de recherche de l'Association des comptables généraux licenciés du Canada. This book was released on 1987 with total page 90 pages. Available in PDF, EPUB and Kindle. Book excerpt: A fundamental question with respect to the market for audit services is whether or not such services are homogeneous across suppliers ... In this monograph, we review the basic principles and findings concerning differentiated product markets as they have been developed in the economic literature. Using Lancaster's characteristics framework, we posit that the audit service contains several attributes which are valued by top management. A key attribute is "credibility", which is communicated by an audit firm's brand name and is identified with the power of an auditor's test ... We posit that, along with other product characteristics, the power of test varies systematically across audit firms. Hypotheses concerning the demand for different audit service specifications (qualities) are developed in a context where companies are changing their capital structure through an initial public offering of common shares. These hypotheses are tested using a sample of 469 U.S. corporations which first "went public" during 1981. The results are consistent with the existence of differential audit services.

Download or read book Demand for Audit Quality in Small Private Firms written by Mervi Niskanen and published by . This book was released on 2009 with total page 33 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study investigates the interaction between audit quality and agency costs, when managerial ownership is used as a proxy for agency costs. The literature on audit quality suggests that firms with high agency costs are more likely to demand audit quality. Our database enables us to compare the demand for audit quality with two different measures; demand for Big 4 auditors and certified auditors with strict professional requirements. The results show that an increase in managerial ownership decreases the likelihood that the firm will engage a Big 4 auditor but it does not have an impact on the demand for certified auditors. Our findings also support previous studies that suggest a nonlinear connection between managerial ownership and demand for audit quality in terms of Big 4 audits. This suggests that audits by Big 4 audit firms are used in informationally opaque private firms to overcome agency costs. We also find that the probability of choosing a Big 4 auditor increases with an increase in firm size and the presence of foreign sales. An increase in leverage increases the likelihood that the firm will engage a Big 4 auditor only in the larger firms and in firms, in which management ownership is above 50%.

Download or read book Audits of Public Companies written by United States. Government Accountability Office and published by . This book was released on 2008 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Big 4 Fee Premium and Audit Quality Latest Evidence from UK Listed Companies written by Domenico Campa and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Using the most recent observations (2005-2011) from a sample of UK listed companies, this study investigates whether Big 4 audit firms exhibit a 'fee premium' and, if this is the case, whether the premium is related to the delivery of a better audit service.Univariate tests, multivariate regressions and two methodologies that control for self-selection bias are used to answer the proposed research questions.Findings provide consistent evidence about the existence of an 'audit fee premium' charged by Big 4 firms while they do not highlight any significant relationship between audit quality and type of auditor with respect to the audit quality proxies investigated.This study joins two streams of the extant literature that investigate the existence of a 'Big 4 audit fee premium' and different audit quality among Big 4 and non-Big 4 clients. Evidence supports the concerns raised by the UK House of Lords in 2010 that the concentrated structure of the audit market could be the driver of 'excessive' fees for Big 4 clients as it does not highlight differences in audit quality between Big 4 and non-Big 4 clients.Evidence from this paper might signal the need for legislative intervention to improve the competitiveness of the audit market as its actual concentrated structure is leading to 'excessive' fees for Big 4 clients. Findings might also enhance Big 4 client bargaining power. Analysing only one country, generalizability of the results might be a limitation.

Download or read book The Effect of Big Four Office Size on Audit Quality written by Dong Michael Yu and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Larger offices of Big Four accounting firms are argued to provide higher quality audits than smaller offices due to greater in-house experience and more expertise in ministering the audits of publicly listed clients. In addition, larger offices are less likely to have independent cerelated problems since an individual client is relatively less important due to larger client bases in bigger offices. My conjecture is tested for a sample of 6,568 firm-year observations for the period 2003 to 2005 that are audited by 285 unique offices of the Big Four accounting firms in the United States. The results are consistent with larger offices providing higher quality audits. Specifically, clients in larger offices evidence less earnings management (smaller abnormal accruals and less earnings benchmark beating behavior). Auditors in larger offices are also more likely to issue going concern audit reports, ceteris paribus. These results hold after controlling for industry leadership by individual accounting firms and specific offices, and the effects of both absolute client size and relative client size (i.e., client size relative to office size). Importantly, the results are robust to partitioning the sample into upper and lower halves of client size, which indicates the results are not driven by large clients (who may have inherently higher quality earnings). While accounting firms have incentives to provide uniform quality across all practice offices, particularly in the post-SOX era with PCAOB inspections, my results indicate that there are frictions in the ability of firms to accomplish this through their existing knowledge sharing practices and quality control procedures.

Download or read book Propensity Score Analysis written by Shenyang Guo and published by SAGE. This book was released on 2015 with total page 449 pages. Available in PDF, EPUB and Kindle. Book excerpt: Provides readers with a systematic review of the origins, history, and statistical foundations of Propensity Score Analysis (PSA) and illustrates how it can be used for solving evaluation and causal-inference problems.

Download or read book Regulation and the Accounting Profession written by John W. Buckley and published by Belmont, Calif. : Lifetime Learning Publications. This book was released on 1980 with total page 266 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book The Role of Audit Firm Size Non Audit Services and Knowledge Spillovers in Mitigating Earnings Management During Large Equity Issues written by Aasmund Eilifsen and published by . This book was released on 2016 with total page 43 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate how audit firm size and large auditor-provided non-audit services (NAS) affect accruals quality around large equity issues and acquisitions for Norwegian public companies from 1999-2013. We find poorer accruals quality around large equity increases. Big 4 audit firms mitigate adverse accruals quality but only if the provision of NAS is moderate or low. In contrast, non-Big 4 audit firms are associated with lower accruals quality around large equity increases, but this effect is moderated if the provision of NAS is high. The findings are consistent with joint provision of audit and NAS as an effective learning mechanism to mitigate earnings management for smaller audit firms and a lesser willingness of larger audit firms to protect earnings when the provision of NAS is high. The evidence contrasts with the notion of large audit firms as universally superior audit quality suppliers and establishes new evidence on how knowledge spillovers from NAS may improve audit quality.

Download or read book Big 4 Global Networks written by M. Paulina Kassawat and published by . This book was released on 2015 with total page 73 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Big 4 global networks (Deloitte, Ernst & Young [E&Y], KPMG, and PricewaterhouseCoopers [PwC]) market themselves as providers of worldwide seamless services and consistent audit quality through their members. Under the current environment in which these auditors operate, there are three types of global network members: inspected non-U.S. affiliates (inspected affiliates, hereafter), non-inspected non-U.S. affiliates (non-inspected affiliates, hereafter), and inspected U.S. offices (U.S. offices, hereafter). The recent suspension of the China-based Big 4 affiliates from auditing U.S.-listed companies calls into question whether these global networks can deliver the same level of audit quality across all their members and whether those located in jurisdictions denying access to the Public Company Accounting Oversight Board (PCAOB or Board, hereafter) to conduct inspections may benefit from such inspections. This study examines the effect of being an affiliate and the effect of PCAOB inspections on perceived audit quality. I use earnings response coefficients (ERCs) as a proxy for perceived audit quality. This study finds no evidence that affiliates have lower perceived audit quality than that of the U.S. offices. Additionally, I find no evidence that PCAOB inspected members have higher perceived audit quality than that of the non-inspected members. These results are robust to different measures of unexpected returns, unexpected earnings, and to using alternative approaches to determine when an auditor has been inspected. These findings are relevant because they provide evidence that the Big 4 global networks are delivering on their promise of providing similar audit quality through all their members. Additionally, the lack of results of the effect of PCAOB inspections on audit quality is inconsistent with accountability theory but may suggest that the internal review systems and other internally developed mechanisms by the global networks are as effective as external accountability measures.

Download or read book A Comparative Study of Audit Quality Among the Big Eight Accounting Firms written by Joseph Vincent Carcello and published by . This book was released on 1990 with total page 286 pages. Available in PDF, EPUB and Kindle. Book excerpt: