Audit Quality Differentiation between International Audit Firm Networks

• In Event: Continental Breakfast - Research and Education Forum
  In Roundtable Session: Table 6: Determinants of Audit Quality

Abstract

We examine audit quality differentials between international audit firm networks. Today, audit firms belonging to a network other than Big 4 also have developed significant resources. Hence, it can be expected that auditors of other audit firm networks can provide high-quality audits. Using the likelihood that an auditor issues a GCO to a financially distressed company, we find that that the probability for issuing a GCO is not different for auditors of other international networks than of Big 4. Further, we find that the audit fee is significantly lower for auditors of other international networks. Audit firms belonging to Big 4 receive higher audit fees than audit firms belonging to FOF which in turn receive higher audit fees than audit firms belonging to OIN. We can conclude that Big 4 auditors do not provide actual higher audit quality but there still is a perceived audit quality difference.

Authors

• Sanne Janssen, University of Antwerp

• Kris Hardies, Universiteit Antwerpen