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Does Auditors' Reputation 'Discourage' Related-Party Transactions? The French Case

Moez Bennouri (), Mehdi Nekhili () and Philippe Touron ()
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Philippe Touron: UP1 - Université Panthéon-Sorbonne

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Abstract: We use a unique data set from a sample of 85 French firms over the period 2002-2008 in order to answer the following questions: Is there any relation between the use of auditors with a brand-name reputation for providing high-quality audit reports and the number of related party transactions (RPTs) reported to outside shareholders? And, how does a more transparent environment for the reporting of related party transactions affect this relationship, if at all? We find that firms audited by Big 4 auditors report fewer related party transactions. The period under study includes the change in accounting standards in Europe that occurred in 2005 with the adoption of IFRS standards, which resulted in a more transparent reporting environment for RPTs. We find that the negative relationship between auditor reputation and the number of reported of RPTs is "weaker" in a more transparent reporting environment. We argue that these results are related to the accounting uncertainty surrounding the reporting of related party transactions that particularly affects the behavior of Big 4 auditors.

Keywords: audit reports; accounting standards; IFRS (search for similar items in EconPapers)
Date: 2015-02
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Published in Auditing: A Journal of Practice and Theory, American Accounting Association, 2015, n.p. ⟨10.2308/ajpt-51036⟩

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Related works:
Working Paper: Does Auditor Reputation “Discourage” Related-Party Transactions? The French Case (2015)
Working Paper: Does Auditors' Reputation 'Discourage' Related Party Transactions? The French Case (2011)
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DOI: 10.2308/ajpt-51036

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