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Auditor Size And Audit Quality
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Book Synopsis Auditor Size and Audit Quality Revisited by :
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,
Book Synopsis Auditor Size and Audit Quality by : Yu Zhou
Download or read book Auditor Size and Audit Quality written by Yu Zhou and published by . This book was released on 2015 with total page 152 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Auditor Size, Partner-specialization, and Private Company Audit Adjustments by : Zachary T. Kowaleski
Download or read book Auditor Size, Partner-specialization, and Private Company Audit Adjustments written by Zachary T. Kowaleski and published by . This book was released on 2018 with total page 57 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines whether auditor size and partner-specialization predict audit adjustments when privately-owned broker-dealers (BDs) change audit firms. Private company auditors have relatively low incentives to compete on quality because managers may select the auditor without involving an audit committee, and these audits present relatively lower reputation and litigation risks compared to public companies. Though I predict that larger firms will provide higher audit quality in this environment, it is unclear whether partner-specialists' will use their BD domain-knowledge to provide higher audit quality where the market does not demand it. Analyses reveal that BDs that change to a larger (smaller) auditor are more (less) likely to record material audit adjustments. BDs that change to a specialist partner, however, are less likely to record material audit adjustments; partners from BD audit firms with no issuer clients drive this effect. Using a subsample with available fee and hour data shows that the auditor size improvements to audit quality correspond with increases to fees and hours, but also incremental to hours. Conversely, partner-specialists employ fewer audit hours than non-specialists. Collectively, these results show that smaller firms, especially the partner-specialists within those firms, are willing to tolerate a higher risk of material misstatement than larger firms will accept when the demand for audit quality is low.
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.
Book Synopsis The Effect of Size and Type of Auditor on Audit Quality by : Hassan Farajzadeh Dehkordi
Download or read book The Effect of Size and Type of Auditor on Audit Quality written by Hassan Farajzadeh Dehkordi and published by . This book was released on 2013 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study aims to investigate whether or not audit quality is influenced by auditor type (governmental vs. private auditors) and by auditor size (Big auditors vs. non-Big auditors). A sample of 2241 firm-year observations from Tehran Stock Exchange (TSE) companies during the period 2002 to 2007 is used. Discretionary accruals (DAC) is employed as representative of audit quality. The cross-sectional version of Jones' model modified by Kothari, et al. (2005) is applied to measure DAC. Results show that financial statements audited by governmental auditors contain smaller discretionary accruals than those audited by private audit firms do. Furthermore, a change from governmental auditor to private auditors is associated with larger discretionary accruals, suggesting that governmental auditors provide superior audits. Finally, the size of non-governmental audit firms does not affect their audit quality, and changes within private audit firms do not lead to changes in the level of discretionary accruals. The empirical results imply that in some settings such as Iran's, factors including auditor type, intense competition, audit committee, and litigation risk are of greater importance than auditor size. This paper shed new light on the comparison of audit quality between governmental and private audit firms.
Book Synopsis Regulation and the Accounting Profession by : John W. Buckley
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:
Book Synopsis Is Audit Quality Different for Big 4 and Mid-tier Auditors? by :
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."
Book Synopsis The Association between Auditor Size and Bank Regulator Ratings by : Edward B. Douthett
Download or read book The Association between Auditor Size and Bank Regulator Ratings written by Edward B. Douthett and published by . This book was released on 2004 with total page 15 pages. Available in PDF, EPUB and Kindle. Book excerpt: Audit quality can potentially affect bank examiners' evaluation of bank condition. We examine the association between Sheshunoff bank ratings, a proxy for regulatory attention, and auditor size, a proxy for audit quality, for a cross-section of 252 banks in 1996. The tests indicate that banks which employ Big 5 auditors have significantly higher Sheshunoff ratings. We believe this result reflects regulators' willingness to rely more on reported financial information and an improved evaluation of the bank's management control system when both are certified by a high quality auditor.
Book Synopsis CPA Firm Viability by : Harold E. Arnett
Download or read book CPA Firm Viability written by Harold E. Arnett and published by . This book was released on 1979 with total page 170 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Book Synopsis Audit Office Size, Audit Quality and Audit Pricing by : Jong-Hag Choi
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.
Book Synopsis Quality, Size, and Performance of Audit Firms by : Yahn-Shir Chen
Download or read book Quality, Size, and Performance of Audit Firms written by Yahn-Shir Chen and published by . This book was released on 2013 with total page 17 pages. Available in PDF, EPUB and Kindle. Book excerpt: This study examines the relations between audit quality, audit firm size, and financial performance. This study estimates audit quality of audit firms from human capital-related factors, such as educational level of auditors, work experience of auditors, and professional training. From the perspective of market segmentation, the sample is divided into three categories: national, regional, and local firms. Empirical results report a positive association between audit firm size and audit quality for the three categories of audit firms. The positive relationship of national audit firms is higher than that of regional and local audit firms. The relationship between audit quality and financial performance is positive. The positive relationship of national audit firms is higher than that of regional and local audit firms.
Book Synopsis Auditor Size and Internal Control Reporting Differences in Nonprofit Healthcare Organizations by : Kevin T. Rich
Download or read book Auditor Size and Internal Control Reporting Differences in Nonprofit Healthcare Organizations written by Kevin T. Rich and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate whether auditor size is associated with the disclosure of internal control exceptions among Circular A-133 audits of nonprofit healthcare organizations. Our focus on auditor report outcomes within the nonprofit healthcare sector is timely and relevant, given the sector's growth and escalating concern for accountability and transparency. Using a sample of 1,180 Circular A-133 audit reports from 2004 to 2008, we find evidence that audits performed by Big 4 firms are less likely to disclose reportable conditions and material weaknesses than those performed by smaller CPA firms. Additional analyses indicate this relation only remains statistically significant for a subsample of small nonprofit healthcare organizations, possibly due to greater selectivity or lower efforts by the Big 4 auditors. Our descriptive statistics also suggest that the market share of the Big 4 firms for Circular A-133 audits decreased during the sample period. We discuss the potential implications of these findings from an audit quality, market dominance, and client size perspective. The results are relevant to hospital financial managers wanting to obtain higher quality audits at a lower cost.
Download or read book Auditqual written by Angus Duff and published by . This book was released on 2004-01-01 with total page 148 pages. Available in PDF, EPUB and Kindle. Book excerpt: "This research report considers service quality and technical quality as components of overall audit quality, and explores their importance to audit firms as a means to help attract and retain high calibre staff as well as to generate sufficient income. It considers the audit expectations gap and service quality and from this develops a model of audit quality based on the existing research literature on the topic. Finally, it examines the external communication and brochures provided for clients by the country's largest audit firms. The research report reflects a combination of documentary research and analysis together with interviews of a sample of auditors, finance directors and fund managers"--p. [i].
Author :Dan A. Simunic Publisher :Canadian Certified General Accountants' Research Foundation = Fondation de recherche de l'Association des comptables généraux licenciés du Canada ISBN 13 : Total Pages :90 pages Book Rating :4.3/5 (512 download)
Book Synopsis Product Differentiation in Auditing by : Dan A. Simunic
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.
Book Synopsis The Benefits and Costs of Group Affiliation by : Stijn Claessens
Download or read book The Benefits and Costs of Group Affiliation written by Stijn Claessens and published by . This book was released on 2002 with total page 36 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates the benefits and associated agency costs of using internal capital markets through affiliating with groups using data of two thousand firms from nine East Asian economies between 1994-96. We find that mature and slow-growing firms with ownership structures more likely to create agency problems gain more from group affiliation, while young and high-growth firms more likely lose. Agency problems are important explanatory factors of firm value in economies outside Japan, but less so in Japan. Consistent with the literature, financially-constrained firms benefit from group affiliation. Our results are robust to different time periods and estimation techniques.
Book Synopsis Audit Quality Attributes, Client Size and Cost of Capital by : Guy Dinesh Fernando
Download or read book Audit Quality Attributes, Client Size and Cost of Capital written by Guy Dinesh Fernando and published by . This book was released on 2008 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: We investigate the effects of audit quality attributes related to the auditor and the auditor-client relationship on the firm's cost of capital. We further examine whether these effects differ according to client size. We focus on two auditor characteristics; auditor size and auditor industry specialization and two auditor-client relationship characteristics; auditor tenure and the auditor's opinion. We use the client firm's cost of capital as a proxy for the degree to which the market values these quality attributes. Auditor size, industry specialization, tenure and type of auditor opinion are important determinants of perceived audit quality. The first three characteristics are negatively related to the cost of capital. We also find that that the client firm's cost of capital increases if the auditor issues any opinion other than a clean opinion. These results are driven by small clients, suggesting audit quality attributes are highly appreciated for smaller clients.
Book Synopsis Demand for Audit Quality in Small Private Firms by : Mervi Niskanen
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%.
