Are the Big 4 audit firms homogeneous? Further evidence from audit pricing

Hrazdil, Karel; Simunic, Dan A.; Suwanyangyuan, Nattavut

doi:10.1111/ijau.12198

Cited by 9 publications

(3 citation statements)

References 60 publications

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“…Accounting firms providing assurance over social and environmental information comprise primary accounting firms, including Deloitte, Ernst & Young, KPMG and PricewaterhouseCoopers (Farooq and De Villiers, 2019). However, BIG 4 firms treated as homogeneous set-in extant research (Hrazdil et al. , 2020) could be differentiated by the characteristics of this group, such as the specialization of assurance partners, which has been a neglected issue in prior research (He, 2022).…”

Section: Resultsmentioning

confidence: 99%

Does the rhetoric art in sustainability reports obstruct the assurance practice?

Mnif

Kchaou

2023

ARA

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PurposeThis paper aims to investigate the relationship between the readability of sustainability reports and assurance provider effort, captured by assurance delay and the moderating effect of the assurance provider.Design/methodology/approachThis sample consists of companies operating in sustainability sensitive industries from 39 countries for the period that covers the years 2016–2018.FindingsThe results show that poor sustainability reporting readability is associated with longer assurance delays. Indeed, assurance providers spend more effort assuring clients when sustainability reports are less readable, as shown by long assurance delay. In addition, increases in assurance delay associated with poor sustainability reporting readability are driven by accounting assurance providers. These results hold after controlling for endogeneity using Heckman's (1979) analysis and other measures of assurance delay readability used in prior literature. By checking the specialization of assurance provider partners and setting aside dominant countries, the authors provide insight into the impact of assurance provider specialization on the association between sustainability report readability and assurance provider effort measured by assurance delay and thus, lending further confidence to the strength of the study’s main findings.Research limitations/implicationsThis research provides preliminary evidence on the relationship between sustainability reporting readability and assurance delay as well as the influence of accounting assurance providers.Practical implicationsSustainability assurance practice is viewed as a tool to add or enhance credibility. This study could be considered as another step into driving the standardization of sustainability reporting practice internationally.Originality/valueThis is the first investigation conducted in the sustainability literature on the assurance provider's response to the readability of sustainability reports.

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Section: Resultsmentioning

confidence: 99%

Does the rhetoric art in sustainability reports obstruct the assurance practice?

Mnif

Kchaou

2023

ARA

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“…Empirical research exploring the differences in audit quality between big 4 and non-big 4 firms has yielded mixed results, further complicating the narrative (Khurana et al, 2021;Berglund et al, 2018). In addition, RAF 22,4 the presupposition of homogeneity within an audit firm and among auditors of a similar tier is equally contestable (Honkamäki et al, 2022;Hrazdil et al, 2020).…”

Section: Auditor Typementioning

confidence: 99%

Audit(or) type and audit quality in emerging markets: evidence from explicit vs. implicit restatements

El-Dyasty

Elamer

2023

RAF

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Purpose This paper aims to examine the link between audit(or) type and restatements in Egypt, a complex and multifaceted auditing market. The usual big 4 versus non-big 4 comparison is insufficient as Egypt has a unique mix of private audit firms, one governmental agency (Accountability State Authority) and mandatory/nonmandatory audit services, including single, joint and dual audits. Design/methodology/approach The study uses a sample of listed companies in Egypt and analyzes the impact of auditor type and audit type on explicit, implicit and total restatements. The study uses logistic regression model to examine the underlying relationship. Findings Results show no relationship between auditor type and audit quality, positive association between non-big foreign CPA firms and total/implicit restatements and mixed results for the impact of dual audits on audit quality. The study found no link between auditor type and audit quality in Egypt. Egyptian audit firms linked to non-big 4 foreign Certified Public Accounting firms were positively linked to total and implicit restatements. Joint audits did not improve audit quality and were directly related to total and explicit restatements. Dual audits showed mixed results, positively associated with implicit restatements but inversely associated with explicit restatements. Originality/value The study provides valuable insights into the complexities of the auditing market in emerging markets and offers valuable insights for stakeholders in the financial statement users, audit firms and governmental agencies.

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“…Past literature documents the fact that large auditors with a well-known brand name (i.e., the Big Four) deliver higher quality audits because they exert more effort [44,45], face higher reputational and litigation risk in the event of a misreporting problem [46], charge higher fees [47,48], and deploy more human capital and technology resources [49]. Furthermore, past studies suggest that firms audited by Big Four auditors exhibit faster information disclosure [50,51], especially during periods of SEC investigation [5].…”

Section: H1 Ceteris Paribus Sec Investigations Have No Impact On Firm...mentioning

confidence: 99%

The Effect of the Security and Exchange Commission’s Investigations into Corporate Social Responsibility Performance

Hrazdil,

Kim,

2023

Sustainability

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We examine the effect of the Security and Exchange Commission’s (SEC) investigations into firms’ corporate social responsibility (CSR) performance. Adopting a staggered event study setting and analyzing all public and private SEC investigations into possible violations of federal securities laws, we find that firms reduce their investment in ESG-related activities and experience significantly lower CSR performance while being investigated by the SEC. This baseline finding is more pronounced among firms that appoint a large auditor or force their CEO to resign. To address concerns about potential endogeneity, we also conduct a multiperiod dynamic analysis and estimate our baseline regressions using the propensity-score-matched sample. Our results further reveal that the negative effect of SEC investigations on CSR performance manifests in CSR activities related to corporate governance and firms’ products. Overall, we highlight some unintended consequences of SEC investigations.

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Are the Big 4 audit firms homogeneous? Further evidence from audit pricing

Cited by 9 publications

References 60 publications

Does the rhetoric art in sustainability reports obstruct the assurance practice?

Does the rhetoric art in sustainability reports obstruct the assurance practice?

Audit(or) type and audit quality in emerging markets: evidence from explicit vs. implicit restatements

The Effect of the Security and Exchange Commission’s Investigations into Corporate Social Responsibility Performance

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