毕业论文外文翻译审计办事处规模审计质量与审计定价适用于毕业.docx

毕业论文外文翻译审计办事处规模审计质量与审计定价适用于毕业.docx

《毕业论文外文翻译审计办事处规模审计质量与审计定价适用于毕业.docx》由会员分享，可在线阅读，更多相关《毕业论文外文翻译审计办事处规模审计质量与审计定价适用于毕业.docx（12页珍藏版）》请在冰豆网上搜索。

毕业论文外文翻译审计办事处规模审计质量与审计定价适用于毕业

AuditOfficeSize,AuditQuality,andAuditPricing

Jong-HagChoi,Chansog（Francis）Kim,

Jeong-BonKim,andYoonseokZang

SUMMARY:

UsingalargesampleofU.S.auditclientfirmsovertheperiod2000–2005,thispaperinvestigateswhetherandhowthesizeofalocalpracticeofficewithinanauditfirmhereafter,officesizeisasignificant,engagement-specificfactordeterminingauditqualityandauditfeesoverandbeyondauditfirmsizeatthenationallevelandauditorindustryleadershipatthecityorofficelevel.Forourempiricaltests,auditqualityismeasuredbyunsignedabnormalaccruals,andtheofficesizeismeasuredintwodifferentways:

onebasedonthenumberofauditclientsineachofficeandtheotherbasedonatotalofauditfeesearnedbyeachoffice.Ourresultsshowthattheofficesizehassignificantlypositiverelationswithbothauditqualityandauditfees,evenaftercontrollingfornational-levelauditfirmsizeandoffice-levelindustryexpertise.Thesepositiverelationssupporttheviewthatlargelocalofficesprovidehigher-qualityauditscomparedwithsmalllocaloffices,andthatsuchqualitydifferencesarepricedinthemarketforauditservices.

Keywords:

auditoffice;officesize;auditquality;auditpricing.

DataAvailability:

Dataarepubliclyavailablefromsourcesidentifiedinthepaper.

Thewaywethinkaboutanaccountingfirmchangesdramaticallywhenweshifttheunitofanalysisawayfromthefirmasawhole,totheanalysisofspecificcity-basedofficeswithinafirm.IntermsofDeAngelo’s1981bargument,aBig4accountingfirmisnotsobigwhenweshifttotheofficelevelofanalysis.Forexample,whileEnronrepresentedlessthan2percentofArthurAnder-sen’snationalrevenuesfrompubliclylistedclients,itwasmorethan35percentofsuchrevenues

intheHoustonoffice.

INTRODUCTION

Asalludedtointheabovequote,thesizeofacity-basedauditengagementofficecouldbeamorecrucialdeterminantofauditqualityandthusauditfeesthanthesizeofanational-levelauditfirmbecausethecity-basedofficeisasemi-autonomousunitwithinanauditfirmwithitsownclientbase.Itisanoffice-basedengagementpartnerorauditteam,notnationalheadquarters,whoactuallyadministersandimplementsindividualauditengagementcon-tracts,includingthedeliveryofauditservicesandtheissuanceofanauditopinion.Inthisregard,Wallman（1996）andFrancis（2004）arguethattheassessmentofauditorindependenceneedstofocusmoreontheindividualofficelevelratherthantheentirefirmlevelbecausemostoftheauditdecisionswithrespecttoaparticularclientaremadewithineachindividualoffice.TheanecdotalevidenceonthecollapseofEnron,whichwasauditedbytheHoustonofficeofArthurAndersen,isagoodexamplethatdemonstratestheimportanceofoffice-levelauditquality.However,much

ofextantauditresearchhasfocuseditsattentionontwonational-levelauditfirmcharacteristicsasfundamentaldeterminantsofauditquality,namely:

auditfirmsize（e.g.,SimunicandStein1987;Beckeretal.1998;FrancisandKrishnan1999;Kimetal.2003;ChoiandDoogar2005）,andauditorindustryleadership（e.g.,DeFondetal.2000;Balsametal.2003;Krishnan2005）.

Thesestudiesfind,ingeneral,thatlargeauditfirmswithinternationalbrandnames（i.e.,Big4auditors）orindustryexpertiseprovidehigher-qualityauditservicesthansmallauditfirmswhich

lacksuchbrandnamesorindustryexpertise.Implicitinthislineofresearchistheassumptionthatauditqualityishomogeneousacrossofficesofvarioussizeslocatedindifferentcitieswithinthesameauditfirm.Asaresult,wehavelittleevidenceoncross-officedifferencesinauditquality,andinparticular,whetherandhowthesizeofalocalengagementofficehasanimpactonauditqualityand/orauditpricing.Anaturalquestiontoaskis:

Istheofficesizeanadditionalengagement-specificfactordeterminingauditqualityandthusauditpricingoverandbeyondauditfirmsizeandindustryleadership?

Weaimtoprovidedirectevidenceonthisunexploredquestion.

Severalrecentstudiesprovideindirectevidencesuggestingthatauditqualitymaydifferacrossdifferentengagementofficeswithinanauditfirm.Forexample,inthefirstU.S.studythatuseseachengagementofficeastheunitofanalysis,ReynoldsandFrancis（2000,375）findthatwhenclientsizeismeasuredattheofficelevelusingoffice-specificclienteles,“Big5auditorsreportmoreconservativelyforlargerclients.”Further,Fergusonetal.（2003）andFrancisetal.（2005）findthatcity-specific,office-levelindustryleadership,whencombinedwiththenational-levelleadership,generatesthehighestauditfeepremiumsandthus,byinference,higherauditqualityintheAustralianandU.S.auditmarkets,respectively,whilenational-levelindustrylead-ershipalonehasnoeffect.Subsequently,Francisetal.（2006）documentthatclientearningsqualityproxiedbyabnormalaccrualsishigherwhenauditorsarecity-levelindustryleadersalone,ortheyarebothcity-levelandnational-levelindustryleaders.Putdifferently,theirresultsindicatethatnational-levelindustryleadershipalonehasnosignificantimpactonauditquality.Morerecently,Choietal.（2007）showthatthegeographicalproximityofthecity-basedengagementofficetoclients’headquartersispositivelyassociatedwiththeaccrualqualityofclients,suggest-ingthatthegeographicallocationoftheauditor’sofficeisanimportantengagement-specificdeterminantofauditquality.Theabovefindings,takentogether,suggestthatcity-based,office-levelcharacteristicsmayplayanimportantroleindeterminingauditqualityandthusauditpricing.

Itshouldbepointedout,however,thatnoneofthesestudieshaspaidattentiontothequestionofwhetherthesizeofalocalengagementofficeissystematicallyassociatedwithauditqualityandfeespaidtoauditors.

Tobridgethisgapinourknowledge,weinvestigateahithertounder-researchedquestionofwhether,andhow,thesizeofalocalengagementofficehereafter,officesizeisassociatedwithauditqualityandauditpricing.Wefirsthypothesizethatofficesizeissystematicallyassociatedwithauditqualityevenaftercontrollingforauditfirmsizeatthenationallevelandauditorindustryexpertiseattheofficelevel.Aswillbefurtherelaboratedinthenextsection,onewould

observeapositiveassociationiftheauditsbylargeofficesareofhigherqualitythantheauditsbysmalloffices.Second,wealsoexaminetheassociationbetweentheofficesizeandauditfees.Previousresearchshowsthatauditqualityispricedinthemarket（Choietal.2008;Craswelletal.1995;Fergusonetal.2003;Francisetal.2005）.Totheextentthattheofficesizeispositivelyassociatedwithauditquality,onecanpredictthatthelargeristheofficesize,thehigheristheauditquality,andthusthegreateristheauditfee.Therefore,apositiveassociationbetweentheofficesizeandauditfeescouldbeviewedasevidencecorroboratingthepositiveassociationbetweentheofficesizeandauditquality.

Intestingourhypotheses,weassertthatbiasedearningsreportingcanbeusedtodrawinferencesaboutauditquality,andweusethemagnitudeofabnormalaccrualsasaproxyforauditquality.Tomeasureabnormalaccruals,werelyontwoalternativemodelsdevelopedbyBallandShivakumar（2006）andKotharietal.（2005）.Inaddition,weestimatethesizeofalocalengage-mentofficeusingtheAuditAnalyticsdatabase,whichprovidestheidentityofauditengagementofficesforallSECregistrantclients.Wemeasureofficesizeintwodifferentways:

onebasedonthenumberofauditclientsineachoffice,andtheotherbasedonatotalofauditfeesearnedbyeachoffice.

Briefly,ourresultsrevealthatintheU.S.auditmarket,bothauditqualityandauditfeesarepositivelyassociatedwithofficesizeaftercontrollingforauditfirmsizeatthenationallevelproxiedbyaBig4dummyvariable,industryleadershipatthelocalofficelevelproxiedbyanindustryspecialistdummyvariable）,andotherrelevantfactors.Theseresultsarerobusttoabatteryofsensitivitychecksweperform.

Ourstudycontributestotheexistingliteratureinseveralways.First,ourpaperisoneoffewstudieswhichdocumentthatauditqualityisnothomogeneousacrosslocalofficeswithinanauditfirm.Toourknowledge,ourpaperisoneofthefirststudiesthatprovidedirectevidencethatthesizeofanauditengagementofficeisanimportantengagement-specificdeterminantofauditqualityintheU.S.Theresultsofourstudysuggestthatfutureresearchonauditqualitydifferentiationneedstopaymoreattentiontooffice-levelauditorbehaviorastheunitofanalysisandtothesizeofalocalengagementoffice.Second,thispaperisthefirsttoconsiderofficesizeasacriticalfactorinauditpricing.Giventhatnopreviousresearchhasexaminedwhetherauditfeesareinfluencedbythesizeofalocaloffice,ourevidencehelpsusbetterunderstandthenatureofauditor-clientrelationshipsinthecontextofauditpricing.

Finally,thefindingsinthisstudyprovidebothregulatorsandpractitionerswithusefulinsightsintowhatdeterminesauditqualityandthusauditfees.Ourresultssuggestthatregulatorswouldhaveabetterassessmentofauditqualityiftheyshiftthelevelofqualitycomparisontosmallversuslargeauditorsattheofficelevel,andawayfromBig4versusnon-Big4auditorsatthenationallevel.Economictheoryonqualitypremiumsclaimsthatproducinggoodsandservicesofauniformqualityforvariousmarketsandconsumersovertimeiscrucialformaintainingqual