Big 4 Client Portfolios: Are they Equivalent?

• In Event: Auditing 3

Abstract

This study examines the public audit client portfolios to determine if there is significant heterogeneity among the Big 4 audit firms. Using the Audit Analytics proprietary Accounting Quality and Risk Matrix data for almost 4,200 clients, our results find statistical support for a Big 4 firm being dissimilar than the others for both the existing long-term client base and newer clients only. The result is consistent with one firm taking a unique risk profile relative to the other large firms. This provides a cautionary note to regulators and investors as any further reduction in the Big 4 could have negative impacts on the functioning of the capital markets.

Authors

• Renee Flasher, Ball State University

• James Schmutte, Ball State University