Auditor Concentration, Auditor Choice and Audit Quality

• In Event: 6.03. Audit Environment and Audit Quality

Abstract

This study examines audit market concentration, auditor choice and audit quality in Russia surrounding the adoption of International Financial Reporting Standards (IFRS). This market is interesting because firms that adopt IFRS are also required to continue producing financial statements under Russian accounting standards (RAS). This gives rise to the possible appointment of dual auditors. We find that the IFRS audit market is naturally dominated by the Big 4 audit firms. However, the adoption of IFRS also impacts auditor concentration in the RAS audit market. Agency costs is the factor that determines the choice of an international auditor (rather than a local Russian auditor) and the choice of a large (relative to small) Russian auditor. International auditors are negatively related to income increasing abnormal accruals, while dual auditors are not associated with abnormal accruals. These results are relevant for current regulatory debate about audit market concentration within European markets.

Authors

• Oksana Kim, Minnesota State University - Mankato

• Michael Eric Bradbury, Massey University - Auckland