Auditor Style and Financial Statement Comparability
Francis, Jere R., Pinnuck, Matthew L., Watanabe, Olena
The Accounting Review · 2014 · Volume 89 · Issue 2
Abstract
The term “audit style” is used to characterize the unique set of internal working rules of each Big 4 audit firm for the implementation of auditing standards and the enforcement of GAAP within their clienteles. Audit style implies that two companies audited by the same Big 4 auditor, subject to the same audit style, are more likely to have comparable earnings than two firms audited by two different Big 4 firms with different styles. By comparable we mean that two firms in the same industry and year will have a more similar accruals and earnings structure. For a sample of U.S. companies for the period 1987 to 2011, we find evidence consistent with audit style increasing the comparability of reported earnings within a Big 4 auditor's clientele. Data Availability:All data are publicly available from the sources identified in the text.
Keywords
earnings, comparability, Big 4 accounting firms
Enable JavaScript for citation tools and additional paper interactions.