{"title":"Big N Audit Quality Effect: New Evidence on Audit Hours and Audit Adjustments","authors":"Jasmine Zhang, Xiao-Jun Zhang, W. Zhou","doi":"10.2139/ssrn.3673591","DOIUrl":null,"url":null,"abstract":"Using a unique data set on audits of Chinese companies, this paper examines the Big N audit quality effect by comparing the audit processes of Big N and non-Big N auditors. We document that Big N audits involve significantly more audit hours with higher per-hour fees but do not result in more audit adjustments. In fact, Big N audits have a significantly higher percentage of cases with no audit adjustments at all. Big N audits also have fewer subsequent restatements. Collectively, this evidence suggests that Big N firms play a significant disciplinary role by performing more time-consuming and costly audits. Anticipating such stringent audits, clients of the Big N increase the quality of their reports ex ante, resulting in fewer audit adjustments and higher-quality financial reports.","PeriodicalId":12319,"journal":{"name":"Financial Accounting eJournal","volume":"101 1","pages":""},"PeriodicalIF":0.0000,"publicationDate":"2020-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"1","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Financial Accounting eJournal","FirstCategoryId":"1085","ListUrlMain":"https://doi.org/10.2139/ssrn.3673591","RegionNum":0,"RegionCategory":null,"ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"","JCRName":"","Score":null,"Total":0}
引用次数: 1
Abstract
Using a unique data set on audits of Chinese companies, this paper examines the Big N audit quality effect by comparing the audit processes of Big N and non-Big N auditors. We document that Big N audits involve significantly more audit hours with higher per-hour fees but do not result in more audit adjustments. In fact, Big N audits have a significantly higher percentage of cases with no audit adjustments at all. Big N audits also have fewer subsequent restatements. Collectively, this evidence suggests that Big N firms play a significant disciplinary role by performing more time-consuming and costly audits. Anticipating such stringent audits, clients of the Big N increase the quality of their reports ex ante, resulting in fewer audit adjustments and higher-quality financial reports.