The impact of Big 4 consulting on audit reporting lag and restatements
Michele D. Meckfessel and
Drew Sellers
Managerial Auditing Journal, 2017, vol. 32, issue 1, 19-49
Abstract:
Purpose - This paper responds to concerns raised by the Securities and Exchange Commission (SEC), Public Company Accounting Oversight Board (PCAOB) and scholars over the rapid growth of Big 4 consulting practices. This paper aims to explores the question: Does the regrowth of sizable consulting practices by the Big 4 influence audit reporting lag and restatement rates? Design/methodology/approach - A population of the SEC-registered US audit clients of the Big 4 was used in this study. Longitudinal data on Big 4 audit clients from 2000 through 2009 were analyzed to determine the impact of consulting practice size on the clients’ audit reporting lag and restatement rate. Findings - This paper finds that consulting practice size has a positive and statistically significant influence on audit reporting lag and restatement rate. The results are robust to alternative specifications of the sample and controlling for the level of non-audit services provided to audit clients. Practical implications - The findings contribute to the discussion of the scope-of-services issue. They provide empirical support for Zeff’s (2003) and Wyatt’s (2004) intuition that the loss of Big 4 professional focus – not simply conflicts of interests – is a major factor affecting the audit quality. Originality/value - The uniqueness of this paper is in how it counts restatements. Each year this paper counts that annual financial statements are restated as opposed to each disclosure of a restatement. This paper’s contribution is to examine the association between the regrowth of Big 4 accounting firm consulting practices with audit reporting lag and restatements.
Keywords: Audit quality; Consulting; Audit reporting lag; Restatements; Scope-of-services (search for similar items in EconPapers)
Date: 2017
References: Add references at CitEc
Citations: View citations in EconPapers (5) Track citations by RSS feed
Downloads: (external link)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (text/html)
https://www.emerald.com/insight/content/doi/10.110 ... d&utm_campaign=repec (application/pdf)
Access to full text is restricted to subscribers
Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:eme:majpps:maj-02-2016-1321
DOI: 10.1108/MAJ-02-2016-1321
Access Statistics for this article
Managerial Auditing Journal is currently edited by Professor Jie Zhou
More articles in Managerial Auditing Journal from Emerald Group Publishing Limited
Bibliographic data for series maintained by Emerald Support ().