Big 4 Auditor Choice and the 10-K Length.

• In Event: Breakfast and Research & Education Table Forum
  In Roundtable Session: Table 3: Audit Quality 1

Abstract

This paper extends earlier research on the audit quality by documenting that the perceived higher quality of auditors, as captured by Big 4 membership, enhances their clients’ financial reporting quality through more expanded disclosure in the 10-K reports. More importantly, I find that the choice of Big 4 auditors encourages firms to provide more narrative disclosure with the intention to increase the credibility of the financial reporting, explain poor financial performance and/or reduce information asymmetries. Lastly, I extend the audit fee literature by showing that the length of financial reporting is positively and significantly associated with higher audit fees. Collectively, this study contributes to a broader question of auditor’s responsibility and its influential role during the disclosure process, which leads to a significant variation of disclosure volume in the 10-K reports.

Author

• Nattavut (Simon) Suwanyangyuan, Simon Fraser University