- مبلغ: ۸۶,۰۰۰ تومان
- مبلغ: ۹۱,۰۰۰ تومان
Purpose – This paper responds to concerns raised by the Securities and Exchange Commission (SEC), Public Company Accounting Oversight Board (PCAOB) and scholars over the rapid growth of Big 4 consulting practices. This paper aims to explores the question: Does the regrowth of sizable consulting practices by the Big 4 influence audit reporting lag and restatement rates? Design/methodology/approach – A population of the SEC-registered US audit clients of the Big 4 was used in this study. Longitudinal data on Big 4 audit clients from 2000 through 2009 were analyzed to determine the impact of consulting practice size on the clients’ audit reporting lag and restatement rate. Findings – This paper finds that consulting practice size has a positive and statistically significant influence on audit reporting lag and restatement rate. The results are robust to alternative specifications of the sample and controlling for the level of non-audit services provided to audit clients. Practical implications – The findings contribute to the discussion of the scope-of-services issue. They provide empirical support for Zeff’s (2003) and Wyatt’s (2004) intuition that the loss of Big 4 professional focus – not simply conflicts of interests – is a major factor affecting the audit quality. Originality/value – The uniqueness of this paper is in how it counts restatements. Each year this paper counts that annual financial statements are restated as opposed to each disclosure of a restatement. This paper’s contribution is to examine the association between the regrowth of Big 4 accounting firm consulting practices with audit reporting lag and restatements.
The data presented support the concern that Big 4 audit practices are not immune to the presence of large consulting practices within the same firm. This is not a trivial matter, as previously noted recent PCAOB inspection reports find significant audit quality issues at each Big 4 firm (PCAOB, 2013a, 2013b). Although the bulk of consulting-revenue growth comes from companies that are not audit clients, Lynn Turner, a former SEC chief accountant, reports concerns with the Big 4 consulting growth, “I think that this is an indication they’re more focused on the bottom line than they are on their audits” (Rapoport, 2014). It is clear that the clients, regulators and the public have an ongoing cause for unease.
Auditing is not a high-growth business. And, audit practice margins are eroded by litigation costs that may increase with expanding disclosure requirements, i.e. publishing the audit partner’s name. Non-audit services can be readily marketed and rendered by accounting firms with relatively little risk. So, the Big 4 naturally expand their businesses into higher growth and more profitable consulting practices to the point that they eclipse the scale and profitability of their audit operations (Cohen, 2016). Yet, running a consulting practice consumes management attention and firm resources; frequently new practices siphon off existing talented staff who may perceive enhanced career opportunities in a nascent venture. And, as an audit firm’s consulting practice grows, it typically recruits additional employees with different education and work experiences. New business models are introduced by consulting practices, including joint ventures, outsourcing contracts, software marketing agreements, etc. This disruption to the firm’s homogeneity may have a deleterious impact by distorting the firm culture, reducing professional focus and exacerbating internal competition. The result, following Wyatt’s and Zeff’s narratives, is commercial concerns subsuming professional values.