Does auditor size matter? Evidence from small audit firms

Comprix, Joseph; Huang, Huichi

doi:10.1016/j.adiac.2015.03.007

Cited by 37 publications

(30 citation statements)

References 39 publications

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“…There are many differences in characteristics between large and small auditing firms (Comprix and huang, 2015). Prior research has examined the relation between audit firm size and topics relating to ethics or professionalism, however the findings seem to be mixed.…”

Section: Auditing Firm Sizementioning

confidence: 99%

Auditors’ ethical reasoning in developing countries: the case of Egypt

Abdelhak¹,

Elamer²,

AlHares³

et al. 2019

IJOES

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Purpose The purpose of this study is to investigate Egyptian auditors’ ethical reasoning, to understand whether auditors’ ethical reasoning is influenced by audit firm size and/or auditor’s position. Design/methodology/approach This paper draws on 178 questionnaires that include six different ethical scenarios. This paper also uses the accounting ethical dilemma instrument that is developed by Thorne (2000) to measure the ethical reasoning of Egyptian auditors. Findings The findings are threefold. First, this study finds that the general level of deliberative ethical reasoning of auditors working in the Central Auditing Organization (CAO) and small firms are categorized in the post-conventional level, while auditors working in big and medium firms are categorized in conventional level. Second, the result suggests that there is a negative relationship between ethical reasoning and audit firm size in Egypt. Finally, the results show that ethical reasoning levels decrease when the position of auditors increase except for auditors working in CAO. Originality/value This study adds to the scarce literature in developing countries that measure auditors’ ethical reasoning. The findings suggest that auditors’ ethical reasoning depends on auditor’s firm size and the position the auditor holds within the firm. These findings will aid policymakers and regulators, especially in developing countries, to avoid any potential risk regarding professional misconduct and in evaluating the adequacy of the current code of ethics.

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Section: Auditing Firm Sizementioning

confidence: 99%

Auditors’ ethical reasoning in developing countries: the case of Egypt

Abdelhak¹,

Elamer²,

AlHares³

et al. 2019

IJOES

View full text Add to dashboard Cite

show abstract

“…Prior research has found that large auditors are associated with higher quality audits than small auditors. For example, prior research finds that large auditors are associated with higher earnings quality (e.g., Becker et al ., ; Francis, Maydew & Sparks, ; Krishnan, ; Carver, Hollingsworth & Stanley, ; DeFond, Erkens & Zhang, ; Comprix & Huang, ), a lower chance of fraud (e.g., Lennox & Pittman, ), a lower likelihood of restatements (e.g., DeFond et al . ; Eshleman & Guo, ), a greater propensity to issue a going‐concern opinion (e.g., Chan & Wu, ; DeFond et al ., ), and more accurate analyst forecasts (e.g., Behn, Choi & Kang, ).…”

Section: Background and Prior Literaturementioning

confidence: 99%

Auditor Size and the Cost of Equity Capital over Auditor Tenure

Bryan

Reynolds

2016

Int J Auditing

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This study examines whether the difference in the cost of equity capital between clients of large and small auditors (‘the cost of equity capital disparity’) varies with auditor tenure. We find that the cost of equity capital disparity increases over auditor tenure, suggesting a decline in the perceived audit quality of small auditors relative to large auditors as tenure lengthens. The results suggest that this occurs because there is a deterioration in perceived audit quality over tenure for small auditors combined with no change in perceived audit quality over tenure for large auditors. Furthermore, we find that the cost of equity capital disparity does not increase over auditor tenure for industry specialist auditors, implying that auditor specialization may act as a substitute for auditor size in reducing investor concerns about audit quality declining over tenure for small auditors.

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“…DeAngelo's research has been followed up with research that suggests audit quality improved as office size increased, both within Big 4 firms (Francis & Yu, ) and across all firms (Choi et al, ). Finally, more recent research reaffirmed DeAngelo's research by suggesting small firms were associated with higher levels of earnings manipulation, which is believed to be an indicator of lower audit quality (Comprix & Huang, ).…”

Section: Background and Hypothesesmentioning

confidence: 79%

“…Research suggests that audit firm size and office size can have an impact on audit quality (Choi et al, ; Comprix & Huang, ; DeAngelo, ). As far back as 1981, it was found that a larger firm size had the tendency to improve audit quality (DeAngelo, ).…”

Section: Background and Hypothesesmentioning

confidence: 99%

The effect of audit opinion signature on a jury's perception of negligence

2018

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New regulation by the Public Company Accounting Oversight Board (PCOAB) and the International Auditing & Assurance Standards Board (IAASB) regarding changes to the way audit opinions are signed has resulted in very different outcomes. The PCAOB requires audit firms to report the audit partner's name on Form AP, which is available on the PCAOB website. The IAASB, on the other hand, requires mandatory disclosure of the audit partner on the audit opinion. Opponents argued that requiring partner signature would increase liability. Based on a scenario depicting fraudulent activity, assessed jury negligence is higher when the partner signs their name to the audit opinion than when they sign their firm's name when measuring both partner and firm negligence. Firm size was assessed but found to be insignificant. Finally, we examined the effect of psychological contract violation theory in relation to the audit opinion signature method, with results suggesting the relationship between signature method and perceived auditor negligence is mediated by trust.

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Does auditor size matter? Evidence from small audit firms

Cited by 37 publications

References 39 publications

Auditors’ ethical reasoning in developing countries: the case of Egypt

Auditors’ ethical reasoning in developing countries: the case of Egypt

Auditor Size and the Cost of Equity Capital over Auditor Tenure

The effect of audit opinion signature on a jury's perception of negligence

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