Accounting - Research Publications

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Auditor Style and Financial Statement Comparability

Francis, JR ; Pinnuck, ML ; Watanabe, O (American Accounting Association, 2014-03-01)

The term “audit style” is used to characterize the unique set of internal working rules of each Big 4 audit firm for the implementation of auditing standards and the enforcement of GAAP within their clienteles. Audit style implies that two companies audited by the same Big 4 auditor, subject to the same audit style, are more likely to have comparable earnings than two firms audited by two different Big 4 firms with different styles. By comparable we mean that two firms in the same industry and year will have a more similar accruals and earnings structure. For a sample of U.S. companies for the period 1987 to 2011, we find evidence consistent with audit style increasing the comparability of reported earnings within a Big 4 auditor's clientele.
Exploring the Challenges of Broadening Accounting Reports

Potter, B ; Soderstrom, N (Oxford University Press, 2014-10-02)