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Title: Audit reporting of big 4 versus non-big 4 auditors : the case of ex-andersen clients
Authors: Lai, KW 
Keywords: Arthur Andersen
Big 4 auditors
Discretionary accruals
Going-concern opinions
Reporting conservatism
Issue Date: 2013
Source: International journal of accounting, 2013, v. 48, no. 4, p. 495-524 How to cite?
Journal: International Journal of Accounting 
Abstract: This paper examines audit reporting of Big 4 auditors versus non-Big 4 auditors for ex-Andersen clients and other clients. It suggests that ex-Andersen clients are more risky than other clients and are able to exert more influence than other clients on non-Big 4 auditors because they are larger in size than other non-Big 4 auditees. In addition, Big 4 auditors are more risk-averse and able to withstand clients' pressure than non-Big 4 auditors. The results show that Big 4 auditors are more likely than non-Big 4 auditors to issue going-concern opinions to ex-Andersen clients or restrict the level of discretionary accruals of those clients compared with other clients. Further, ex-Andersen clients of Big 4 auditors would have had a lower likelihood of receiving going-concern opinions or higher levels of discretionary accruals had reporting practices for other clients been applied. Ex-Andersen clients of non-Big 4 auditors would have had a higher likelihood of going-concern opinions or lower levels of discretionary accruals. Hence, the suggestion to reduce the Big 4 concentration in the audit market by allowing non-Big 4 firms a larger market share should be viewed prudently. Overall, these results are consistent with the suggestion that litigation risk and client pressure are important factors in audit reporting.
ISSN: 0020-7063
DOI: 10.1016/j.intacc.2013.10.001
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