Auditor Lobbying on Accounting Standards

Abigail M. Allen (aallen@hbs.edu), Karthik Ramanna (kramanna@hbs.edu) and Sugata Roychowdhury (sugata.roychowdhury@bc.edu)
Additional contact information
Abigail M. Allen: Harvard Business School, Accounting and Management Unit
Karthik Ramanna: Harvard Business School, Accounting and Management Unit
Sugata Roychowdhury: Boston College

No 15-055, Harvard Business School Working Papers from Harvard Business School

Abstract: We examine how Big N auditors' changing incentives impact their comment-letter lobbying on U.S. GAAP over the first thirty-four years of the FASB (1973-2006). We examine the influence of auditors' lobbying incentives arising from three basic factors: managing expected litigation and regulatory costs; catering to clients' preferences for flexibility in GAAP; and being conceptually aligned with the FASB, particularly on the use of fair values in accounting. We find evidence that auditor lobbying is driven by prevailing standards of litigation and regulatory scrutiny and by support for fair-value accounting. But we find no evidence that catering to clients' preferences for flexibility in GAAP drives auditor lobbying. Broadly, our paper offers the first large-sample descriptive analysis of the role of Big N auditors in the accounting standard-setting process.

Keywords: Auditors; FASB; GAAP; lobbying (search for similar items in EconPapers)
JEL-codes: D72 G18 M41 M42 M48 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2014-12
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Citations: View citations in EconPapers (3)

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