scholarly journals Does a Lack of Choice Lead to Lower Quality? Evidence from Auditor Competition and Client Restatements

2013 ◽  
Vol 32 (3) ◽  
pp. 31-67 ◽  
Author(s):  
Nathan J. Newton ◽  
Dechun Wang ◽  
Michael S. Wilkins
Keyword(s):  
Audit Quality ◽  
Negative Impact ◽  
Market Competition ◽  
Ongoing Debate ◽  
Policy Makers ◽  
Generally Accepted Accounting Principles ◽  
Market Participants ◽  
Audit Market ◽  
Financial Restatements ◽  
The Relationship

SUMMARY: We examine the relationship between auditor competition and the likelihood of financial restatements that occur as a result of failures in the application of generally accepted accounting principles (GAAP). Policy makers and audit market participants have expressed concern that the current level of auditor competition is low, resulting in a negative impact on audit quality. However, we find that restatements are more likely to occur in metropolitan statistical areas (MSAs) that have higher auditor competition. The association between audit market competition and restatements is statistically and economically significant. Our finding of a positive relationship between the likelihood of restatement and audit market competition is relevant to the ongoing debate regarding audit quality and the concentration of audit markets.

The Relationship between Audit Market Competition and Audit Fee

2017 ◽  
Vol 35 (1) ◽  
pp. 185-215
Author(s):  
Hyun Jae Park ◽  
Jaewan Park ◽  
Hye Jeong Nam
Keyword(s):  
Market Competition ◽  
Audit Market ◽  
Audit Fee ◽  
The Relationship

The effect of auditor narcissism on audit market competition

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Hojat Mohammadi ◽  
Mahdi Salehi ◽  
Meysam Arabzadeh ◽  
Hassan Ghodrati
Keyword(s):  
Financial Markets ◽  
Significant Relationship ◽  
Design Methodology ◽  
Audit Quality ◽  
Stock Exchange ◽  
Market Competition ◽  
Competitive Pressure ◽  
Content Type ◽  
Listed Firms ◽  
Audit Market

Purpose This paper aims to assess auditor narcissism’s effect on audit market competition (auditor concentration, clients’ concentration and competitive pressure). Design/methodology/approach This paper’s method is descriptive-correlational based on published information from listed firms on the Tehran Stock Exchange from 2012 to 2018 using a sample of 188 firms (1,310 observations). The method used for hypothesis testing is linear regression using panel data. Findings The results show a negative and significant relationship between auditor narcissism and audit market competition and its indices, including auditor concentration, clients’ concentration and competitive pressure. Moreover, a positive and significant relationship was observed between audit quality and audit market competition and its indices, including auditor concentration, client concentration and competitive pressure. Originality/value To analyzes competition indices in the audit market (auditor concentration, clients’ concentration and competitive pressure). The variable is assessed once more using the exploratory factor analysis of the so-called three variables single variable, named audit market competition. So the central question of the study is investigated within a broader sense. Moreover, as the present study is carried out in the emergent financial markets with extremely competitive audit markets to figure out the effect of auditors’ intrinsic characteristics on such markets’ competitiveness, it can provide useful information in this field.

Dressing for the Occasion? Audit Quality in the Presence of Competition for New Clients

2021 ◽  
Author(s):  
Henrik Moser
Keyword(s):  
Audit Quality ◽  
Market Competition ◽  
New Approach ◽  
Auditor Choice ◽  
Audit Market ◽  
Auditor Quality ◽  
The Impact

This paper investigates the impact of increased audit market competition on audit quality and auditor choice. I develop a model comprising two auditors who compete for a new client by choosing the audit quality for their respective existing clients and using the audited report as a signal. I identify factors that influence auditor quality decisions as well as the behavior of clients, who potentially misstate their reports. Auditors are tempted to alter audit quality because they are eager to appear desirable from a new client's perspective. Interestingly, while recipients of the audited report adjust their conjectures about audit quality, there are conditions under which auditors lower their audit quality to increase the likelihood of being hired. The analysis extends the existing literature by describing a new approach to modeling the auditors' motivation to signal reputation for certain behavior.

The Association between the Number of Auditors as a Proxy for Audit Market Competition and Audit Quality

2018 ◽  
Vol 43 (5) ◽  
pp. 159-196
Author(s):  
Wonsuk Ha ◽  
Catherine Heyjung Sonu ◽  
Jong-Hag Choi ◽  
Ahrum Choi
Keyword(s):  
Audit Quality ◽  
Market Competition ◽  
Audit Market

The Relationship between Audit Market Competition and Conservatism

2019 ◽  
Vol 37 (2) ◽  
pp. 165-187
Author(s):  
Hyun Jae Park ◽  
Khee Su Bae
Keyword(s):  
Market Competition ◽  
Audit Market ◽  
The Relationship

Audit Market Structure and Audit Pricing

2016 ◽  
Vol 31 (1) ◽  
pp. 57-81 ◽  
Author(s):  
John Daniel Eshleman ◽  
Bradley P. Lawson
Keyword(s):  
Fixed Effects ◽  
Audit Quality ◽  
Audit Fees ◽  
Market Concentration ◽  
First Year ◽  
Audit Pricing ◽  
Ongoing Debate ◽  
Audit Market ◽  
Big 4 ◽  
The U.S

SYNOPSIS Extant literature finds mixed evidence on the association between audit market concentration and audit fees. We re-examine this issue using a large sample of U.S. audit clients covering 90 metropolitan statistical areas (MSAs) spanning 2000–2013. We find that audit market concentration is associated with significantly higher audit fees, consistent with the concerns of regulators and managers. We also find that increases in audit market concentration are associated with fewer initial engagement fee discounts (i.e., reduced lowballing), particularly for non-Big 4 clients. We reconcile our findings with those of prior research and find that our divergent findings are attributable to controls for MSA fixed effects. In supplemental analyses, we find that audit market concentration is associated with higher audit quality. We also find that concentration is associated with higher audit quality for first-year engagements, but only if the auditor does not lowball on the engagement. Our results are relevant to the ongoing debate regarding the consequences of increased concentration within the U.S. audit market (GAO 2003, 2008). JEL Classifications: M41; M42; L13.

The Effects of Terrorist Activities on Foreign Direct Investment: Nonlinear Evidence from Turkey

2013 ◽  
Vol 64 (2) ◽  
Author(s):  
Tolga Omay ◽  
Bahar Araz-Takay ◽  
Ayşegül Eruygur ◽  
Ilker Kiliç
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Linear Models ◽  
Negative Impact ◽  
Warning Signal ◽  
Threshold Level ◽  
Policy Makers ◽  
Effective Policy ◽  
The Impact ◽  
The Relationship

AbstractIn this study, we examine the relationship between foreign direct investment (FDI) and terrorist incidents that took place in Turkey during the period 1991:12 to 2003:12. By doing so we contribute to the literature by allowing for a possible nonlinear relationship between terrorism and FDI. The data used to measure the intensity of terrorism were collected from a major newspaper of Turkey, and therefore is limited to the direct signals given to the market. Empirical evidence from both linear and non-linear models confirms that terrorism has a large negative impact on foreign direct investment. As far as the results of the nonlinear model estimation are concerned, the impact of terrorism on FDI is estimated to be more severe during periods of high terrorism where the intensity of terrorism passes a certain threshold level. This threshold level can be interpreted as a warning ‘signal’ that FDI may decrease severely and thereby can be used by policy makers to design effective policy measures and by potential investors as an indicator of a country’s risk profile

Sign in / Sign up

Export Citation Format

Share Document