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 Does Audit Firm Size Matter The Effect of Audit Firm Size Measured by Audit Firm Revenues Number of Offices and Professional Headcounts on Audit Quality and Audit Fees written by Gil S. Bae and published by . This book was released on 2013 with total page 54 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using audit firm size measured by audit firm revenues, the number of offices, and professional headcounts, we find that audit firm size measured as continuous variable is positively associated with engagement-level audit quality proxied by discretionary accruals and modified opinions, and is also positively associated with audit fees. The Big 4 audit firms differ considerably in size and their size also measured by revenues, the number of offices, and professional headcounts is significantly associated with the audit quality and audit fee differences across Big 4 auditors. However, we find only limited evidence of the hypothesized relation between associate-to-partner ratio (i.e., human capital leverage) and audit quality, and find no evidence that associate-to-partner ratio is associated with audit fees.
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 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 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 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 Auditor Size and Audit Quality Revisited written by and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: The objective of this thesis is to revisit the notion of audit quality and investigate how it is related to auditor size and the structure of the auditing industry. Specifically, I propose a model of audit firm competition where both audit quality and auditor size are endogenous and predict how market characteristics, namely market size and investor protection regime, affect the structure of the auditing industry and differences between Big-4 and Non-Big-4 audit quality and fees. I show that Big-4 audit firms compete mostly on audit value (i.e., quality and price) through investments in audit technology, the level of which is increasing in both market size and investor protection. Consistent with my predictions, empirical results for the U.S. audit market, where investor protection is held constant across local markets, confirm that the audit industry is characterised as a natural oligopoly dominated by the higher quality Big-4 audit firms. More importantly, I find that Big-4 audit value is increasing in market size. In particular, Big-4 audit quality, relative to Non-Big-4 audits is constant in market size while Big-4 audit fee premium is decreasing in market size. I also present detailed hypotheses adapted to a cross-country setting to empirically evaluate the impact of investor protection regimes on characteristics of the audit industry and the audit product. Although I leave to future research actual empirical testing, preliminary evidence reviewed from other studies generally supports my hypotheses. My thesis has direct policy implications as it provides key insights about the audit industry, how audit firms compete and how the industry evolves. Taken together, my results imply that the audit industry is naturally concentrated yet remains overall competitive. That is, Big-4 audit quality and fees are not adversely affected, thus far, by the high level of auditor concentration and Big-4 market power. Accordingly, recent concerns about high auditor concentration,
Download or read book The Theory of Industrial Organization written by Jean Tirole and published by MIT Press. This book was released on 1988-08-26 with total page 1482 pages. Available in PDF, EPUB and Kindle. Book excerpt: The Theory of Industrial Organization is the first primary text to treat the new industrial organization at the advanced-undergraduate and graduate level. Rigorously analytical and filled with exercises coded to indicate level of difficulty, it provides a unified and modern treatment of the field with accessible models that are simplified to highlight robust economic ideas while working at an intuitive level. To aid students at different levels, each chapter is divided into a main text and supplementary section containing more advanced material. Each chapter opens with elementary models and builds on this base to incorporate current research in a coherent synthesis. Tirole begins with a background discussion of the theory of the firm. In Part I he develops the modern theory of monopoly, addressing single product and multi product pricing, static and intertemporal price discrimination, quality choice, reputation, and vertical restraints. In Part II, Tirole takes up strategic interaction between firms, starting with a novel treatment of the Bertrand-Cournot interdependent pricing problem. He studies how capacity constraints, repeated interaction, product positioning, advertising, and asymmetric information affect competition or tacit collusion. He then develops topics having to do with long term competition, including barriers to entry, contestability, exit, and research and development. He concludes with a "game theory user's manual" and a section of review exercises. Important Notice: The digital edition of this book is missing some of the images found in the physical edition.
Download or read book Office Size of Big 4 Auditors and Client Restatements written by Jere R. Francis and published by . This book was released on 2014 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: Francis and Yu (2009) and Choi, Kim, Kim, and Zang (2010) report evidence that Big 4 audits are of higher quality when the engagement office is of larger size: specifically, client earnings quality is higher and auditors in larger offices are more likely to issue going concern audit reports. We extend this line of research to test if larger Big 4 offices have fewer client restatements. A client restatement provides more direct evidence of a low-quality audit than earnings quality metrics or going concern reports, because a restatement indicates the client's auditor did not effectively enforce the correct application of GAAP at the time the original financial statements were issued. We analyze 2,557 firm-year restatements in a sample of 23,190 financial statements originally issued by U.S. firms in 2003-2008. We find that Big 4 office size is associated with fewer client restatements after controlling for innate client characteristics that may affect restatements (client size, financial performance, industry membership, non-financial measures, off-balance sheet activities, and market-related measures), and a set of controls for other auditor factors such as fees and industry expertise. The study raises important questions about the ability of smaller offices to deliver high-quality audits for SEC registrants.
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 Audits of Public Companies written by United States. General Accounting Office and published by Nova Publishers. This book was released on 2008 with total page 154 pages. Available in PDF, EPUB and Kindle. Book excerpt: This book examines (1) concentration in the market for public company audits, (2) the potential for smaller accounting firms' growth to ease market concentration, and (3) proposals that have been offered by others for easing concentration and the barriers facing smaller firms in expanding their market shares.
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 Financial Gatekeepers written by Yasuyuki Fuchita and published by Brookings Institution Press. This book was released on 2007-02-01 with total page 216 pages. Available in PDF, EPUB and Kindle. Book excerpt: A Brookings Institution Press and Nomura Institute of Capital Markets Research publication Developed country capital markets have devised a set of institutions and actors to help provide investors with timely and accurate information they need to make informed investment decisions. These actors have become known as "financial gatekeepers" and include auditors, financial analysts, and credit rating agencies. Corporate financial reporting scandals in the United States and elsewhere in recent years, however, have called into question the sufficiency of the legal framework governing these gatekeepers. Policymakers have since responded by imposing a series of new obligations, restrictions, and punishments—all with the purpose of strengthening investor confidence in these important actors. Financial Gatekeepers provides an in-depth look at these new frameworks, especially in the United States and Japan. How have they worked? Are further refinements appropriate? These are among the questions addressed in this timely and important volume. Contributors include Leslie Boni (University of New Mexico), Barry Bosworth (Brookings Institution), Tomoo Inoue (Seikei University), Zoe-Vonna Palmrose (University of Southern California), Frank Partnoy (University of San Diego School of Law), George Perry (Brookings Institution), Justin Pettit (UBS), Paul Stevens (Investment Company Institute), Peter Wallison (American Enterprise Institute).
Download or read book Audit Office Size Audit Quality and Audit Pricing written by Jong-Hag Choi and published by . This book was released on 2013 with total page 42 pages. Available in PDF, EPUB and Kindle. Book excerpt: Using a large sample of U.S. audit client firms over the period 2000-2005, this paper investigates whether and how the size of a local practice office within an audit firm (henceforth, office size) is a significant, engagement-specific factor determining audit quality and audit fees over and beyond audit firm size at the national level and auditor industry leadership at the city or office level. For our empirical tests, audit quality is measured by unsigned abnormal accruals, and the office size is measured in two different ways: one based on the number of audit clients in each office and the other based on a total of audit fees earned by each office. Our results show that the office size has significantly positive relations with both audit quality and audit fees even after controlling for national-level audit firm size and office-level industry expertise. These positive relations support the view that large local offices provide higher-quality audits, compared with small local offices and that such quality differences are priced in the market for audit services.
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 Multilevel Statistical Models written by Harvey Goldstein and published by Hodder Education. This book was released on 1995 with total page 178 pages. Available in PDF, EPUB and Kindle. Book excerpt: The basic linear multilevel model and its estimation - Extensions to the basic multilevel model - The multivariate multilevel model - Nonlinear multilevel models - Models for repeated meadures data - Multilevel models for discrete response data - Multilevel cross classification - Multilevel event history models - Multilevel models with measurement errors - Software for multilevel modelling; missing data and multilevel structural equation models.
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."
