Audit regulators around the world have expressed concern over market dominance by Big 4 accounting firms and the potential adverse effect it may have on the quality of audited financial statements. We use cross‐country variation in the audit market structure of 42 countries to examine two separate aspects of Big 4 dominance: (1) Big 4 market concentration as a group relative to non–Big 4 auditors; and (2) concentration within the Big 4 group in which one or more of the Big 4 firms is dominant relative to the other Big 4 firms. We find that in countries where the Big 4 (as a group) conduct more listed company audits, both Big 4 and non–Big 4 clients have higher quality audited earnings compared to clients in countries with smaller Big 4 market shares. In contrast, in countries where there is a greater concentration within the Big 4 group, we find that Big 4 clients have lower quality audited earnings compared to countries with more evenly distributed market shares among the Big 4. Thus concentration within the Big 4 group appears to be detrimental to audit quality in a country and of legitimate concern to regulators and policymakers. However, Big 4 dominance per se does not appear to harm audit quality and is in fact associated with higher earnings quality, after controlling for other country characteristics that potentially affect earnings quality.

Several GTP-binding proteins (G-proteins) undergo posttranslational modifications (isoprenylation and carboxyl methylation) in pancreatic ␤ cells. Herein, two of these were identified as CDC42 and rap 1, using Western blotting and immunoprecipitation. Confocal microscopic data indicated that CDC42 is localized only in islet endocrine cells but not in acinar cells of the pancreas. CDC42 undergoes a guanine nucleotide-specific membrane association and carboxyl methylation in normal rat islets, human islets, and pure ␤ (HIT or INS-1) cells. GTP ␥ S-dependent carboxyl methylation of a 23-kD protein was also demonstrable in secretory granule fractions from normal islets or ␤ cells. AFC (a specific inhibitor of prenyl-cysteine carboxyl methyl transferases) blocked the carboxyl methylation of CDC42 in five types of insulin-secreting cells, without blocking GTP ␥ S-induced translocation, implying that methylation is a consequence (not a cause) of transfer to membrane sites. High glucose (but not a depolarizing concentration of K ϩ ) induced the carboxyl methylation of CDC42 in intact cells, as assessed after specific immunoprecipitation. This effect was abrogated by GTP depletion using mycophenolic acid and was restored upon GTP repletion by coprovision of guanosine. In contrast, although rap 1 was also carboxyl methylated, it was not translocated to the particulate fraction by GTP ␥ S; furthermore, its methylation was also stimulated by 40 mM K ϩ (suggesting a role which is not specific to nutrient stimulation). AFC also impeded nutrient-induced (but not K ϩ -induced) insulin secretion from islets and ␤ cells under static or perifusion conditions, whereas an inactive structural analogue of AFC failed to inhibit insulin release. These effects were reproduced not only by S -adenosylhomocysteine (another methylation inhibitor), but also by GTP depletion. Thus, the glucose-and GTP-dependent carboxyl methylation of G-proteins such as CDC42 is an obligate step in the stimulus-secretion coupling of nutrient-induced insulin secretion, but not in the exocytotic event itself. Furthermore, AFC blocked glucose-activated phosphoinositide turnover, which may provide a partial biochemical explanation for its effect on secretion, and implies that certain G-proteins must be carboxyl methylated for their interaction with signaling effector molecules, a step which can be regulated by intracellular availability of GTP.

Recently we described roles for heterotrimeric and low-molecular-mass GTP-binding proteins in insulin release from normal rat islets. During these studies, we observed that a protein with an apparent molecular mass (37 kDa) similar to that of the beta subunit of trimeric GTP-binding proteins underwent phosphorylation in each of five classes of insulin-secreting cells. Incubation of the beta cell total membrane fraction or the isolated secretory granule fraction (but not the cytosolic fraction) with [gamma-32P]ATP or [gamma-32P]GTP resulted in the phosphorylation of this protein, which was selectively immunoprecipitated by an anti-serum directed against the common beta subunit of trimeric G-proteins. Disruption of the alpha beta gamma trimer (by pretreatment with either fluoroaluminate or guanosine 5'(-)[gamma-thio]triphosphate) prevented beta subunit phosphorylation. Based on differential sensitivities to pH, heat and the histidine-selective reagent diethyl pyrocarbonate (and reversal of the latter by hydroxylamine), the phosphorylated amino acid was presumptively identified as histidine. Incubation of pure beta subunit alone or in combination with the exogenous purified alpha subunit of transducin did not result in the phosphorylation of the beta subunit, but addition of the islet cell membrane fraction did support this event, suggesting that membrane localization (or a membrane-associated factor) is required for beta subunit phosphorylation. Incubation of phosphorylated beta subunit with G alpha.GDP accelerated the dephosphorylation of the beta subunit, accompanied by the formation of G alpha-GTP. Immunoblotting detected multiple alpha subunits (of Gi, G(o) and Gq) and at least one beta subunit in the secretory granule fraction of normal rat islets and insulinoma cells. These data describe a potential alternative mechanism for the activation of GTP-binding proteins in beta cells which contrasts with the classical receptor-agonist mechanism: G beta undergoes transient phosphorylation at a histidine residue by a GTP-specific protein kinase; this phosphate, in turn, may be transferred via a classical Ping-Pong mechanism to G alpha.GDP (inactive), yielding the active configuration G alpha.GTP in secretory granules (a strategic location to modulate exocytosis).

We report the carboxylmethylation of a 36-kDa protein in intact normal rat islets and clonal beta (INS-1) cells. This protein was predominantly cytosolic. Its carboxylmethylation, as assessed by vapor phase equilibration assay, was resistant to inhibition by N-acetyl-S-trans, trans-farnesyl-L-cysteine, a competitive substrate for cysteine methyl transferases. These data suggest that the methylated C-terminal amino acid is not cysteine. The methylated protein was identified as the catalytic subunit of protein phosphatase 2A (PP2Ac) by immunoblotting. The carboxylmethylation of the PP2Ac increased its catalytic activity, suggesting a key role in the functional regulation of PP2A. Therefore, we studied okadaic acid, a selective inhibitor of PP2A that acts by an unknown mechanism. Okadaic acid (but not 1-nor-okadaone, its inactive analog) inhibited (Ki = 10 nM) the carboxylmethylation of PP2Ac and phosphatase activity in the cytosolic fraction (from normal rat islets and clonal beta-cells) as well as in intact rat islets. Furthermore, methylated PP2Ac underwent rapid demethylation (t 1/2 = 40 min) catalyzed by a methyl esterase localized in islet homogenates. Ebelactone, a purported inhibitor of methyl esterases, significantly delayed (> 200 min) the demethylation of PP2Ac. Furthermore, ebelactone reversibly inhibited glucose- and ketoisocaproate-induced insulin secretion from normal rat islets. These data identify, for the first time, a methylation-demethylation cycle for PP2Ac in the beta-cell and suggest a key functional relationship between PP2A activity and the carboxylmethylation of its catalytic subunit. These findings thus suggest a negative modulatory role for PP2A in nutrient-induced insulin exocytosis.

SUMMARY Prior audit research suggests that most, if not all, audit quality can be explained at the office level. However, the question remains of whether office-level audit quality is contingent on how individual offices relate to the firm as a whole. Motivated by theories of knowledge management, organizational learning, and networks, we posit that individual offices are connected to their audit network through partner knowledge sharing and oversight, which impact office-level audit quality. We interview Big 4 audit partners and learn that knowledge sharing between partners in different offices is common and intended to aid in the provision of audit services. Using network connectedness to proxy for knowledge sharing and oversight between offices of the same firm, we document that more connected offices are associated with fewer client restatements and lower discretionary accruals. We additionally find that network effects are magnified when accounting treatments are more complex and require greater auditor judgement.