Big 4 Conservatism Around the World

Chung, Richard; Firth, Michael; Kim, Jeong‐Bon; Pang, Lei

doi:10.1007/978-3-642-44955-0_8

Cited by 6 publications

(3 citation statements)

References 46 publications

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“…For example, whether the positive relation between audit quality and auditor size remains unchanged under different litigation environments is questioned by prior studies. Chung, Firth, and Kim (2003) and Francis and Wang (2008) find that the Big N firms are not quality-differentiated auditors in countries with lower investor protection. Choi et al (2008) also argue that legal liability should not be neglected when investigating audit quality and audit pricing.…”

Section: Impact Of Litigation Risk On the Relation Between Auditor mentioning

confidence: 99%

The impact of litigation risk on the association between audit quality and auditor size: Evidence from China

Wong

Firth²,

Lo³

2018

Financ Manag Account

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We examine whether audit quality varies across different sizes of CPA firms under high or low auditor‐specific litigation risk exposure. We measure audit quality by the issuance of modified audit opinions and the audit fees charged to clients, and we use the organizational form of CPA firms as the proxy for auditors’ litigation risk exposure, where a partnership (limited liability) CPA firm represents a high (low) litigation risk exposure. Built on Choi, Kim, Liu, and Simunic's (2008) theoretical framework, we hypothesize that the litigation risk exposure of CPA firm moderates the association between auditor size and audit quality. Our results show that when the auditor's liability is capped (i.e., registered as a limited liability form of CPA firm), larger size CPA firms are associated with higher audit quality when compared to smaller size CPA firms. However, this positive association between auditor size and audit quality disappears for audit firms that are subject to high litigation risk exposures (i.e., registered as a partnership form of CPA firm). Our research provides new insights on the impact of auditor‐specific litigation risks on the relation between audit quality and auditor size. In particular, we show that only when auditor‐specific litigation risk is limited, do large CPA firms appear to perform higher quality audits than small CPA firms.

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Section: Impact Of Litigation Risk On the Relation Between Auditor mentioning

confidence: 99%

The impact of litigation risk on the association between audit quality and auditor size: Evidence from China

Wong

Firth²,

Lo³

2018

Financ Manag Account

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“…11 depicts a positive relationship between ROA and AA, which is consistent with the findings ofChen et al (2010) andChung, Firth, Kim and Pang (2014), where both studies reported that companies with higher ROA produced superior financial reporting and audit quality, in the U.S and Korea, respectively. As mentioned in section 5.2.3.2,Chen et al (2010) …”

supporting

confidence: 84%

The impact of ownership structures on the financial performance and corporate governance of JSE-listed firms.

Naidu

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“…A variable BIG4 is included in the regression because several studies show using Big 4 auditors promotes greater conservatism (Chung et al, 2014;Francis and Wang, 2008). Prior studies show that Big 4 auditors are concerned about their exposure to litigation and risks to their reputation (Francis and Wang, 2008;Liao and Radhakrishnan, 2016), one consequence of which is that they recommend conservative accounting practices to their clients.…”

Section: Methodology Developmentmentioning

confidence: 99%

The role of investment property appraisal in European real estate companies

Mäki

2020

JERER

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Purpose This paper aims to examine the connection between appraisals of investment properties and earnings properties in companies from two perspectives: what kinds of companies employ the most reputable appraisers and how appraisers produce estimations. Design/methodology/approach The research uses annual reports of European Union (EU) publicly traded real estate companies and examines the period 2007-2016. Findings The contribution of this study lies in establishing that some indicators and features of real estate companies affect the choice of appraiser and also in illustrating differences in the results of property valuations. In short, smaller companies with weaker performance are less willing to use external valuation, and external appraisers produce more conservative estimations for investment properties. Practical implications The research produces beneficial information for investors and other stakeholders interested in the real estate industry. Originality/value This is the first novel study to examine the link between appraisals of investment properties and earnings properties in companies in detail.

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Big 4 Conservatism Around the World

Cited by 6 publications

References 46 publications

The impact of litigation risk on the association between audit quality and auditor size: Evidence from China

The impact of litigation risk on the association between audit quality and auditor size: Evidence from China

The impact of ownership structures on the financial performance and corporate governance of JSE-listed firms.

The role of investment property appraisal in European real estate companies

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