Abstract
This study investigates the country-level development of the audit profession in emerging market countries and whether this development is associated with audit quality and auditor choice. I find that audit quality is higher for client companieslocated in countries with a more developed audit profession, after controlling for rule oflaw and investor protection. Specifically, Big 4 client companies' total and abnormalaccruals are both lower, and earnings are more conservative in countries with stronger Audit Profession Development (APD). However, these results hold only for companies audited by a Big 4 auditor. Results also indicate that stronger APD is associated with a greater likelihood that a client company hires a Big 4 auditor. My findings contribute to the literature that explores differences in audit quality and determinants of auditor choice, the literature that explores cross-country differences in audit professions, and research on the characteristics and effectiveness of audit institutions in emerging market economies.
Original language | English (US) |
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Pages (from-to) | 1731-1764 |
Number of pages | 34 |
Journal | Accounting Review |
Volume | 86 |
Issue number | 5 |
DOIs | |
State | Published - Sep 2011 |
Keywords
- Audit profession
- Audit quality
- Auditor choice
- Developing countries
- Emerging markets
- International accounting
ASJC Scopus subject areas
- Accounting
- Finance
- Economics and Econometrics