Comparing the Auditor Quality of Arthur Andersen to that of the Big 4

ABSTRACT: This study compares the audit quality of Arthur Andersen with that of the Big 4 accounting firms. An expanded indicator of audit quality is developed based on the law of business misconduct literature and the legal process literature. A representation of audit quality is derived from an analysis of the legal actions initiated against these five large public accounting firms from 1996 to 2004. The legal action was partitioned into three year periods. In the first period, Arthur Andersen and the Big 4 evidenced no quality differential. In the second and third periods, the Big 4, in aggregate, rated higher on the audit quality indicator than did Andersen. The robustness of these findings is substanti-ated using multiple logistic regression and sensitivity analysis. When the individual firms are compared with Andersen, all four evidenced higher audit quality; three of the firms are significantly higher. This suggests that Andersen represents an outlier within the audit population. However, the analysis also indicates that overall audit quality declined in the period immediately following the passage of the Private Securities Litigation Reform Act of 1995. This suggests that the Sarbanes-Oxley Act provisions directed toward remedying auditing deficiencies is justified and not an overreaction to a ‘‘few bad apples.’

Calidad de la auditoría, Second-Tier

This paper aims to analyse the effect of the client size on the probability for an audit failure when the auditor issues the report, which is a sign of lower audit quality. The results for a sample of Spanish privately distressed firms, differentiating Big4 from Second-Tier and other auditors, suggest that there is a different auditor behaviour based on the client size. The Big4 and Second-Tier auditors provide higher audit quality in larger client firms than other auditors. These results can reflect the importance of protecting auditor reputation on its possible dependence of its client. Further, when considering small client firms, the results reveal that the Second-Tier auditors’ failure is higher than for other auditors. This could be explained by their lower concern about reputational loss, considering the lower visibility and litigation cost of this type of clients. However, this lower quality of the Second-Tier auditors is not observed when the client firm bankruptcy is imminent.46240,1820,35Q3Q4Sello FECYTSSC

Stakeholder attitudes towards audit credibility in English local government: A post‐Audit Commission analysis

In recent years, substantial changes have been implemented to the audit regimes for local authorities in several countries. Following the abolishment of the Audit Commission, a unique regime for the audit of local authorities has emerged in England, with external audit now fully conducted by private sector audit firms. Auditor appointments for the vast majority of local authorities are now managed by a new organisation, Public Sector Audit Appointments Limited (PSAA). Drawing on the determinants of audit credibility developed by Funnell, Wade and Jupe (2016), this paper examines how local authority stakeholders in the transformed landscape of local public audit in England perceive audit credibility, including the role of PSAA and other audit stakeholders. Findings show that the impact of current arrangements is positively perceived by stakeholders in relation to auditors’ technical competence and independence, at least in the short term, however significant concern is found amongst stakeholders regarding the usefulness of local public audits. Compared to Funnell et al. (2016), we ascribe these differences to the different context of audit in English local government and suggest the relative weighting of determinants of audit credibility are contingent