Big Six auditors and audit quality: The Korean evidence

Woo, Jeong， Seok; Rho, Joonhwa

doi:10.1016/j.intacc.2004.02.001

Cited by 87 publications

(40 citation statements)

References 16 publications

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“…The results indicate that auditing the financial statements of companies by large audit firms (high audit quality) is not effective in reducing the manipulation of discretionary accruals by managers and cannot control the opportunistic behaviours of managers. The obtained results are consistent with the research results of Jeong and Rho [13] and Abdul and Ali [14], Memis and Cetenak [15] but, contrary to research results of Chen et al [16], Becker et al [17] and Zgarni et al [18]. provide evidence that auditors' industry specialization affects negatively the accruals earnings management, as documented in prior studies [17,19].…”

Section: Review Of Empirical Studiessupporting

confidence: 91%

Audit Quality and Earnings Management among Nigerian Listed Deposit Money Banks

Olabisi¹,

To²,

To³

2017

Int J Account Res

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IntroductionIn recent times, the call for reliable financial reporting has gained prominence in Nigeria and global economy at large. The capability or incapability of banks to effectively fulfill intermediate mandate has been the crux of many financial crises. Mediating between the surplus and deficit units within the economy expedites distribution of national savings, thereby improving investments and national output. In 2005, the Central Bank of Nigeria mandated every Nigerian bank to increase capital base from 2 billion naira to 25 Billion Naira in order to enhance competitiveness in the international market. Noteworthy capital market expectations were raised and banks were under pressure to achieve survival and generate higher returns to shareholders. This pressure from the Central Bank of Nigeria has occasioned banks falsifying accounts, inflating earnings and capital. The need for reliable reports has led to statutory audit that provides independent authentication of financial statements prepared by banks' directors.Auditors are instructed to report financial misdemeanors in company's accounts to increase transparency and accountability through fraud detection. Earnings are made up of accruals and cash items and accruals are basically controlled by company's stewards. Management can bloat performance of company and future earnings predictions through manipulation of accruals resulting in earnings management. Financial reports contain accounting information which different users use to appraise firm's performance. Investors use cash flow statement to make investment decisions thereby creating room for highly motivated and intelligent management teams to manipulate the real economic operations to influence the true picture of a company's cash flow from operations. Since accrual accounting measures the performance of company by recognizing economic events irrespective of when transactions occur. Earnings management is therefore, discovered by conducting tests on the components of accrual assumed to be at the managerial discretionary accruals thereby revealing information asymmetries. Accounting scandals experienced in the last few years have affected the regulators' trust of financial statements. This scandal and its consequent results are reasons for drawing attention to quality and reliability of financial statements in the banking sector. Therefore, the absence of investors' confidence in the reported earnings influence the financial market because investors are major players in ensuring availability of capital to support the economic system. Given the above state, this study seeks to assess the effect of audit quality on earnings management in Nigerian listed deposit money banks. The broad objective of this study is to identify relationship between audit quality and earnings management of Nigerian listed money deposit banks while to assess relationship among joint audit, auditor specialization, auditor independence and audit tenure on the earnings management in the listed deposit money banks in Nigeria wo...

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Section: Review Of Empirical Studiessupporting

confidence: 91%

Audit Quality and Earnings Management among Nigerian Listed Deposit Money Banks

Olabisi¹,

To²,

To³

2017

Int J Account Res

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“…The results indicated that there is a positive relation between modification of auditor opinions and the abnormal accruals. In sum, Big 4 have a greater ability to detect the accounting problems and the financial statements certified by this group of auditors had less earning management (Jeong and Rho, 2004).…”

Section: The Institutional Monitoring Activity After the Enron Collapsementioning

confidence: 96%

“…According to previous research (Koh, 2007;Jeong and Rho, 2004;Becker et al, 1998), we include control variables in our second model. We use absolute value of total accruals because firms with large absolute value of total accruals will show higher discretionary accruals (Jeong and Rho, 2004).…”

Section: Control Variablesmentioning

confidence: 99%

“…We use absolute value of total accruals because firms with large absolute value of total accruals will show higher discretionary accruals (Jeong and Rho, 2004). We also include shareInc and shareDec variable to control the manipulated earning due to the incentives associated to the selling of manager shareholding (Beneish, 1997).…”

Section: Control Variablesmentioning

confidence: 99%

“…Discretionary accruals are the dependent variable obtained from Khotari et al (2005) model. To mitigate the effect of cross-sectional in the regression, we use the variability in the annual estimates (Bernard, 1987;Becker et al1998;Jeong and Rho, 2004). DA it = Estimated discretionary accruals;NB4 it = Dummy variable equal to one if the two auditors are non-Big Four; 0 otherwise; Invest it = The percentage of the major institutional shareholders; ShareInc it = Dummy variable equal to one when there is a decline of more than 10% of the total outstanding shares during the year; ShareDec it = Dummy variable equal to one when there is a decline of more than 10% the total outstanding shares during the year; 0 Otherwise; HiLev it = Dummy variable indicating whether firms are among the highest decile of leverage, by year and industry; 0 otherwise; Size it = Natural logarithm of total assets; Ab.…”

Section: Multivariate Analysesmentioning

confidence: 99%

See 2 more Smart Citations

Institutional Activism, Auditor’s Choice and Earning Management after the Enron Collapse: Evidence from France

Azibi¹,

Azibi²,

Tondeur³

2017

IBR

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This paper treats the relation between institutional shareholders, auditor's choice and earning management after the Enron collapse in French context. This context is characterized by the weak of investor protection compared to Common Law countries and the presence of the higher ownership concentration. Three hypotheses are tested around this question. The Empirical results demonstrate that institutional investor has more incentives to control the manager opportunism through the discretionary accruals and influence negatively the appointment of the Big 4 auditors after Enron collapse.

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Audit quality and audit size: Evidence from auditor mergers in China

Zhan

Her

Chen

2020

J Corp Accounting Finance

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Focusing on the surge of mergers among Chinese local accounting firms around the year 2000, this study examines the impacts of auditor mergers on audit quality, and documents increased earnings quality for non‐Big 5 clients during the postmerger period. The study also brings up the question for further investigation, whether the Big 5 auditors provide significant higher quality audits than the non‐Big auditors do in China, a far less litigious audit market environment, during the period of 1999–2002. We find limited differences in terms of audit quality between the Big 5 and non‐Big 5 auditors. We do not find significant differences in reported discretionary accruals and probability of reporting losses between Big 5 clients and non‐Big 5 clients. Only with the earnings conservatism proxy, clients with Big 5 recognize bad news more quickly than non‐Big 5 clients. Furthermore, findings of this study suggest the Big 5 audits do not contribute to the accruals quality differences in China, implying legal enforcement and litigation risks have greater propensity to drive auditor incentives.

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Big Six auditors and audit quality: The Korean evidence

Cited by 87 publications

References 16 publications

Audit Quality and Earnings Management among Nigerian Listed Deposit Money Banks

Audit Quality and Earnings Management among Nigerian Listed Deposit Money Banks

Institutional Activism, Auditor’s Choice and Earning Management after the Enron Collapse: Evidence from France

Audit quality and audit size: Evidence from auditor mergers in China

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