Big five audits and accounting fraud

Contemporary Accounting Research

Volumn 27, Issue 1, 2010, Pages 209-247

  Lennox, Clive ^a   Pittman, Jeffrey A ^b  

^a NANYANG TECHNOLOGICAL UNIVERSITY   (Singapore)

^b MEMORIAL UNIVERSITY OF NEWFOUNDLAND   (Canada)

Author keywords

Accounting fraud; Agency costs; Big Five audits; Corporate governance

Indexed keywords

EID: 77952410108     PISSN: 08239150     EISSN: 19113846     Source Type: Journal    
DOI: 10.1111/j.1911-3846.2010.01007.x     Document Type: Article

References (61)

1. Abbott, L. J., S. Parker G. F. Peters. 2004. Audit committee characteristics and restatements. Auditing: A Journal of Practice & Theory 23 (1 69 87.
2. Baltagi, B. 1995. Econometric analysis of panel data.
3. Balvers, R., McDonald, B. R. Miller. 1988. Underpricing of new issues and the choice of auditor as a signal of investment banker reputation. Accounting Review 63 (4 605 622.
4. Beasley, M. S. 1996. An empirical analysis of the relation between the board of director composition and financial statement fraud. Accounting Review 71 (4 443 465.
5. Beasley, M. S., J. V. Carcello, D. R. Hermanson P. D. Lapides. 2000. Fraudulent financial reporting: Consideration of industry traits and corporate governance mechanisms. Accounting Horizons 14 (4 441 454.
6. Beatty, R. 1989. Auditor reputation and the pricing of initial public offerings. Accounting Review 64 (4 693 709.
7. Berle, A. A. G. C. Means. 1932. The modern corporation and private property.
8. Burns, N. S. Kedia. 2006. The impact of performance-based compensation on misreporting. Journal of Financial Economics 79 (1 35 67.
9. Caramanis, C. C. Lennox. 2008. Audit effort and earnings management. Journal of Accounting and Economics 45 (1 116 138.
10. Carcello, J. V. Z.-V. Palmrose. 1994. Auditor litigation and modified reporting on bankrupt clients. Journal of Accounting Research 32 (S-3 1 30.
11. Carcello, J. V. A. L. Nagy. 2004. Audit firm tenure and fraudulent financial reporting. Auditing: A Journal of Practice and Theory 23 (2 55 69.
12. Carcello, J. V. T. L. Neal. 2000. Audit committee composition and auditor reporting. Accounting Review 75 (4 453 467.
13. Coffee, J. C. 2001. The acquiescent gatekeeper: Reputational intermediaries, auditor independence and the governance of accounting. Working paper, Columbia University School of Law.
14. Coffee, J. C. 2002. Understanding Enron: It's about the gatekeepers, stupid. Working paper, Columbia University School of Law.
15. Cox, J. D. 2003. Reforming the culture of financial reporting: The PCAOB and the metrics for accounting measurements. Washington University Law Review 81 (2 301-27.
16. Craswell, A. T. J. R. Francis. 1999. Pricing initial audit engagements: A test of competing theories. Accounting Review 74 (2 201-16.
17. DeAngelo, L. 1981a. Auditor independence, "low balling", and disclosure regulation. Journal of Accounting and Economics 3 (2 113 127.
18. DeAngelo, L. 1981b. Auditor size and audit quality. Journal of Accounting and Economics 3 (3 183 199.
19. Dechow, P. M., W. Ge, C. R. Larson R. G. Sloan. 2009. Predicting material accounting misstatements. AAA 2008 Financial Accounting and Reporting Section (FARS) Paper. Available at: http://ssrn.com/abstract=997483.
20. DeFond, M., M. Ettredge D. Smith. 1997. An investigation of auditor resignations. Research in Accounting Regulation 11 (1 25 46.
21. DeFond, M. L. J. R. Francis. 2005. Audit research after Sarbanes-Oxley. Auditing: A Journal of Practice and Theory 24 (S-1 5 30.
22. Desai, H., C. Hogan M. Wilkens. 2006. The reputational penalty for aggressive accounting: Earnings restatements and management turnover. Accounting Review 81 (1 83 112.
23. Desai, M. A. 2005. The degradation of reported corporate profits. Journal of Economic Perspectives 19 (4 171 192.
24. Dye, R. 1993. Auditing standards, legal liability and auditor wealth. Journal of Political Economy 101 (5 887 914.
25. Earley, C. E., K. Odabashian M. Willenborg. 2003. Some thoughts on the audit failure at Enron, the demise of Andersen, and the ethical climate of public accounting firms. Connecticut Law Review 35 (3 1013 1033.
26. Efendi, J., A. Srivasta E. P. Swanson. 2007. Why do corporate managers misstate financial statements? The role of option compensation and other factors. Journal of Financial Economics 85 (3 667 708.
27. Erickson, M., M. Hanlon E. L. Maydew. 2006. Is there a link between executive equity incentives and accounting fraud? Journal of Accounting Research 44 (1 1 31.
28. Fich, E. M. A. Shivdasani. 2007. Financial fraud, director reputation, and shareholder wealth. Journal of Financial Economics 86 (2 306 336.
29. Francis, J. R. 2004. What do we know about audit quality? The British Accounting Review 36 (4 345 368.
30. Francis, J. R. C. Lennox. 2009. Selection models in accounting research. Working paper, Hong Kong University of Science and Technology.
31. Greene, W. 2001. Fixed and random effects in nonlinear models. Working paper, New York University.
32. Healy, P. K. Palepu. 2003. The fall of Enron. Journal of Economic Perspectives 17 (2 3 26.
33. Imhoff, E. A. Jr. 2003. Accounting quality, auditing, and corporate governance. Accounting Horizons 17 (S-1 117 128.
34. Jensen, M. C. W. H. Meckling. 1976. Theory of the firm: Managerial behavior, agency costs, and ownership structure. Journal of Financial Economics 3 (4 305 360.
35. Johnson, W. B. T. Lys. 1990. The market for audit services: Evidence from voluntary auditor changes. Journal of Accounting and Economics 12 (1-3 281 308.
36. Johnstone, K. 2000. Client-acceptance decisions: Simultaneous effects of client business risk, audit risk, auditor business risk, and risk adaptation. Auditing: A Journal of Practice and Theory 19 (1 1 26.
37. Karpoff, J. M., D. S. Lee G. S. Martin. 2008. The cost to firms of cooking the books. Journal of Financial and Quantitative Analysis 43 (3 581 612.
38. Kinney, W. R. Jr. 1999. Auditor independence: A burdensome constraint or core value? Accounting Horizons 13 (1 69 75.
39. Klein, A. 2002. Audit committee, board of director characteristics, and earnings management. Journal of Accounting and Economics 33 (3 375 400.
40. Krishnan, J. J. Krishnan, 1997. Litigation risk and auditor resignations. Accounting Review 72 (4 539 560.
41. Larcker, D. F. T. O. Rusticus. 2010. On the use of instrumental variables in accounting research. Journal of Accounting and Economics 49 (3 186 205.
42. Lee, H. Y. V. Mande. 2003. The effect of the Private Securities Litigation Reform Act of 1995 on accounting discretion of client managers of Big 6 and non-Big 6 auditors. Auditing: A Journal of Practice and Theory 22 (1 93 108.
43. Lennox, C. J. A. Pittman. 2007. The importance of IRS monitoring to accounting fraud. Working paper, Hong Kong University of Science and Technology.
44. Levitt, A. 1998. The importance of high quality accounting standards. Accounting Horizons 12 (1 79 82.
45. Macey, J. H. A. Sale. 2003. Observations on the role of commodification, independence and governance in the accounting industry. Villanova Law Review 48 (4 1167 1188.
46. Maksimovic, V. S. Titman. 1991. Financial policy and reputation for product quality. Review of Financial Studies 4 (1 175 200.
47. Mayer, J. 2002. The accountants' war. New Yorker April 22 : 64 72.
48. Miller, G. S. 2006. The press as a watchdog for accounting fraud. Journal of Accounting Research 44 (5 1 33.
49. Myers, J. N., L. A. Myers T. C. Omer. 2003. Exploring the term of the auditor-client relationship and the quality of earnings: A case for mandatory auditor rotation? Accounting Review 78 (3 779 799.
50. Myers, J. N., L. A. Myers, Z-V. Palmrose S. Scholz. 2005. The length of auditor-client relationships and financial statement restatements. Working paper, Texas A&M University.
51. Petersen, M. A. 2009. Estimating standard errors in finance panel data sets: Comparing approaches. Review of Financial Studies 22 (1 435 480.
52. Pincus, K., W. H. Holder T. J. Mock. 1988. Reducing the incidence of fraudulent financial reporting: The role of the Securities and Exchange Commission.
53. Pittman, J. A. S. Fortin. 2004. Auditor choice and the cost of debt capital for newly public firms. Journal of Accounting and Economics 37 (1 113 136.
54. Public Oversight Board. 2002. Final annual report 2001.
55. Puhani, P. A. 2000. The Heckman correction for sample selection and its critique. Journal of Economic Surveys 14 (1 53 68.
56. Ruddock, C. M. S., S. J. Taylor S. L. Taylor. 2006. Non-audit services and earnings conservatism: Is auditor independence impaired? Contemporary Accounting Research 23 (3 701 746.
57. Securities and Exchange Commission. 2000. Hearing on auditor independence (July).
58. Securities and Exchange Commission. 2001. Proposed rule: Revision of the commission's auditor independence requirements.
59. Shu, S. 2000. Auditor resignations: Clientele effects and legal liability. Journal of Accounting and Economics 29 (2 173 205.
60. Willenborg, M. 1999. Empirical analysis of the economic demand for auditing in the initial public offering market. Journal of Accounting Research 37 (1 225 238.
61. Zeff, S. A. 2003. How the U.S. accounting profession got where it is today: Part II. Accounting Horizons 17 (4 267 286.