Associations and Networks of International Accounting Firms

• In Event: Audit Markets 2

Abstract

Small accounting firms join accounting associations and networks (AANs) to gain access to technical resources and accounting personnel in other industries and geographic locations. Bills et al. (2016) find that AANs allow small accounting firms operating in the United States (U.S.) to improve audit quality but Mao et al. (2017) find that similar benefits do not extend to small accounting firms that join AANs in China. Thus, it remains an empirical question whether AAN membership provides benefits to small international accounting firms operating outside of the U.S. Using a difference-in-differences design, we find that, across 24 countries, audit quality improves on average after small international accounting firms join an AAN. We further find that AAN audit quality is not significantly different from Big 4 audit quality for similarly sized clients. These findings have important implications for accounting firms, audit committees, regulators, and investors in international markets.

Authors

• Xi Ai, University of Tennessee-Knoxville

• Lauren Dreher Cunningham, University of Tennessee

• Xiao Li, Central University of Finance and Economics

• Linda A. Myers, University of Tennessee-Knoxville