International markets have also experienced instances of insufficient auditing that do not Challenges related to the consistent application of global audit methodologies include local in
Trang 1Vol 95, No 6 DOI: 10.2308/tar-2018-0294November 2020
by local audit firms from the same global network (different global networks) Furthermore, inferences are similarwhen we examine client accrual comparability around audit firm switches induced by the failure of Andersen, whichserves as a shock that helps improve identification In falsification tests, having auditors from the same globalnetwork is not associated with differences in operating cash flows Results also suggest that the role of globalnetwork methodologies in global financial reporting comparability is more pronounced across stronger investorprotection jurisdictions and across jurisdictions that have adopted International Standards on Auditing
JEL Classifications: M41; M42
Keywords: audit firm networks; comparability; investor protection; ISAs
I INTRODUCTION
network of legally independent, individual firms The objective of these global networks is to coordinate thedevelopment and enforcement of a given audit firm’s global strategies, standards, policies, and governance Forexample, PricewaterhouseCoopers (PwC) International Limited states that the network’s common ‘‘methodologies,technologies, and materials are designed to help member firms, partners and staff perform their work more consistently,
unique global audit methodologies across their affiliates
The authors acknowledge helpful comments from Michael Willenborg (editor), two anonymous reviewers, Richard Hanus, John McNamara, Joe Schroeder, and workshop participants at Texas A&M University and the 2018 Deloitte/University of Kansas Auditing Symposium All authors acknowledge support from the Mays Business School.
Matthew S Ege, Texas A&M University, Mays Business School, Department of Accounting, College Station, TX, USA; Young Hoon Kim, George Mason University, School of Business, Accounting Area, Fairfax, VA, USA; Dechun Wang, Texas A&M University, Mays Business School, Department
of Accounting, College Station, TX, USA.
Editor’s note: Accepted by Michael Willenborg.
Submitted: May 2019Accepted: November 2019Published Online: November 2019
Trang 2Auditors use judgment when following auditing standards because these standards ‘‘are generally principles-based rather
audit based on local incentives, potentially resulting in undesired variation in audit quality across jurisdictions
Enforcing a consistent audit methodology across borders is important to the U.S equity market because foreign affiliates ofglobal networks regularly audit Securities and Exchange Commission (SEC) registrants The Public Company Accounting
participation in audits of SEC registrants International markets have also experienced instances of insufficient auditing that do not
Challenges related to the consistent application of global audit methodologies include local incentives, differences in
unique audit methodologies across their affiliates
We focus our study on the global networks of BDO, Deloitte, Ernst & Young (EY), Grant Thornton, KPMG, and PwC(hereafter, the Big 6) because (1) each describes its global reach and global audit methodology on its respective website, and
supported by resources such as ‘‘global knowledge management databases and common industry-specific work programs and
If each global network does enforce a unique audit methodology, then client financials of affiliates within a network should
network enforcement of a unique audit methodology should result in greater comparability because the ‘‘unique character of auditmethodologies implies that each firm’s audit approach will systematically detect or not detect the same client errors, including
comparability as ‘‘the closeness of two firms’ reported earnings due to the consistency with which rules are applied across firms.’’Auditors have more influence over the accounting for accruals than cash flows, given the judgment required in the accruals
networks enforce global audit methodologies by using four accruals-based measures of comparability Three of these are based
2
For example, upon the merger of Price Waterhouse and Coopers & Lybrand, firm leadership developed a global methodology that addressed ‘‘the need
3
suggesting that Deloitte failed to monitor and enforce its global methodology within its Brazilian affiliate In 2018, the PCAOB sanctioned Deloitte
4
See: https://pcaobus.org/Registration/Firms/Pages/GlobalNetworkFirms.aspx (last accessed September 23, 2019) Each of the six global networks has affiliate firms in at least 140 countries based on disclosures from their websites However, not all of these are registered with the PCAOB According to the PCAOB website, the number of global network affiliate firms that are registered with the PCAOB as of 2017 are: BDO (54), Deloitte (62), EY (70), Grant Thornton (47), KPMG (52), PwC (64).
6
If auditors consistently implement a set of procedures, then the output should be consistent accounting treatments for similar economic transactions Although consistently implemented procedures could result in overall low-quality financial reporting, this seems unlikely due to market forces (e.g., regulatory oversight, market demand) Thus, we think it is appropriate to conclude that greater cross-country financial reporting comparability among a global network’s clientele is evidence of the auditor enforcing a consistent audit methodology, which should promote high-quality audits This does not mean that audit quality will always be sufficient for regulators or markets because the audit methodology could consistently miss certain types of errors
or consistently treat a certain transaction in a way that is inconsistent with a financial reporting framework However, if global networks did not enforce (at least to a certain extent) a global audit methodology, then local audit firms would have much more leeway to audit according to local incentives, all else equal This would not result in increased financial reporting comparability or high audit quality across the auditor’s global network.
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comparability of reported financial information However, even if it is not readily comparable, relevant and faithfully represented information is still useful Comparable information, however, is not useful if it is not relevant and may mislead if it is not faithfully represented Therefore, comparability
is considered an enhancing qualitative characteristic instead of a fundamental qualitative characteristic.’’
Trang 3on differences in actual or predicted accruals The fourth is based on the covariance of accruals over 16 quarters We comparethese measures between cross-jurisdictional client-pairs that use audit firms from the same versus different global networks.Our sample comes from the Compustat, Global Compustat, and Capital IQ databases and comprises 83,455 client-years from
93 countries for years 2003 to 2016 This results in 2,123,959 client-year pairs, of which 429,348 have auditors that areaffiliates of the same global network
Using multiple regression analysis, we find consistent evidence that two companies from different jurisdictions have morecomparable accruals when their auditors are from the same global network From an economic perspective, client-pairs that haveaffiliate auditors from the same network have comparability measures that are 1.1 percent to 7.5 percent higher than the median
To help rule out the alternative explanation that results are due to clients selecting auditors based upon audit methodology(i.e., client-auditor matching), we use the failure of Andersen U.S as a shock Upon the failure of Andersen U.S., its foreignaffiliates joined other global networks, resulting in their clients being subject to new audit methodologies We find thatdifferences in accruals between former Andersen clients and clients of the audit firm that audits these former Andersen clientsbecome smaller after Andersen’s demise Additionally, for a broader sample of switches where client-pairs come to haveaffiliate auditors from the same (different) global network, we find some evidence that accruals comparability increases(decreases) after the audit firm change
whether investor protection strength affects the magnitude of the effect of global audit methodologies on client financial reportingcomparability The repercussions to audit firms for not following audit methodologies are more severe in stronger investorprotection regimes, but stronger investor protection potentially affects earnings quality, such that the audit methodologies ofglobal networks may matter less for client financials In 18 of 24 specifications, we find evidence consistent with global networkmethodologies playing more of a role in financial reporting comparability across jurisdictions with higher investor protection
We also consider whether the adoption of International Standards on Auditing (ISAs) affects the extent that local affiliatesimplement global network audit methodologies The global networks base their audit methodologies on the ISAs Therefore, injurisdictions that implement ISAs, local auditors are encouraged to follow ISAs both by their jurisdiction and their globalnetwork Our results suggest that network methodologies play more (less) of a role in financial reporting comparability acrossjurisdictions that have adopted (have not adopted) ISAs
As a falsification test, we examine whether client-pairs having auditors from the same global network are associated withdifferences in operating cash flows Global audit methodologies are less likely to include unique procedures for the audit of cash,which requires much less judgment to audit versus accruals Thus, global audit methodologies should have little, if any, effect onthe comparability of cash flows We find no effect of client-pairs having auditors from the same global network on differences inoperating cash flows Finally, we execute several additional tests that provide insights into the robustness of the results
We contribute to the international audit literature in important ways This literature has primarily focused on how
audit quality However, we know little about whether global networks seek to ensure worldwide audit quality, which mattersbecause of the growing number of audit engagements involving multiple global network affiliates
that global networks do enforce unique global audit methodologies, and that enforcement varies across jurisdictions
the production of financial information, in the comparability of reported earnings across countries Thus, we contribute to
Our results should be of interest to academics, auditors, standard setters, and regulators For example, the International
United Kingdom have expressed concerns about the audit quality of global network affiliates Our evidence suggests that whileglobal networks do enforce, on average, a consistent audit methodology that should provide a foundation on which to executehigh-quality audits, there is potentially variation in execution across jurisdictions Without enforcement of global auditing
that hold the main responsibility for implementation of the standards developed as well as the moral guidance and leadership ofthe audit profession, especially in countries where the quality of audit practice has been regarded as sub-optimal.’’
Trang 4II INSTITUTIONAL BACKGROUND AND HYPOTHESIS DEVELOPMENTGlobal Audit Firm Networks
of Deloitte Touche Tohmatsu Limited (DTTL) All the member firms of DTTL ‘‘are legally separate and independent entities,which cannot obligate each other DTTL and each DTTL member firm are liable only for their own acts and omissions’’
audit methodology and a system of quality controls to monitor adherence to it For example, each is a member of the Forum ofFirms and has committed to ‘‘promote the consistent application of high-quality audit practices and standards worldwide’’ and
Through inspection of affiliates, consistent use of technology, and common training, each global network seeks to ensure theconsistent application of its global audit methodology
The global methodologies contain ‘‘different steps [that] are narrowly defined and detailed prescriptions for theapproach to auditing; for instance, descriptions of the planning process, the process of evaluating risks, the approach to testing’’
regulated, where accounting rules and standards are translated into practice, and where professional identities are mediated,
Related Literature and Hypotheses Development
Global Audit Firm Networks and Financial Reporting Comparability
Our research question primarily relates to two streams of literature The first explores variation in audit quality of affiliates
of large global audit firms and finds that audit quality varies across countries and across and within the global networks Forexample, the development of the audit profession within emerging market countries is positively associated with audit quality
8
A global audit network is defined as ‘‘a contractual cooperation between legally and economically autonomous national audit firms, which are organized based on partnership principles under the strategic leadership of one or more member firms for the joint fulfilment of international client
resulted in the six networks noted here.
PwC member firm’s Territory Senior Partner signs an annual confirmation of compliance with PwC’s standards These confirmations cover a range of areas, including independence, ethics and business conduct, enterprise risk management, governance, anti-corruption, anti-money laundering, anti-trust, insider trading and information protection.’’
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There are different auditing standards throughout the world The ISAs are the most widely adopted, with 125 countries committed to their use (based on
http://www.iaasb.org/clarity-center/support-and-guidance [last accessed April 2, 2018]) Other standards exist, such as standards for U.S public company audits from the PCAOB Global networks create their global audit methodologies based on ISAs and supplement the methodologies with requirements from local standards where applicable (e.g., PCAOB internal control testing for U.S public companies) While audit teams may have to adapt global audit methodologies for specific audits, our understanding is that this is rare and does not affect clients in the vast majority of markets 14
metrics, evaluating and rewarding our people.’’ Additionally, within 100 days of the merger of Price Waterhouse and Coopers & Lybrand, ‘‘all 60,000 Assurance professionals in 150 countries were trained on the [PwC Audit Approach] through a three-day training course delivered at the local-
Trang 5The second line of literature examines the determinants of financial reporting comparability and has focused on accountingstandards and monitoring of economic agents For example, the adoption of international financial reporting standards (IFRS)
comparability in emerging markets, as it relates to U.S companies, and that hiring Big 4 auditors is a potential mechanism
4 auditor have more comparable earnings compared to client-pairs from different U.S Big 4 auditors, which is consistent witheach of these auditors enforcing a unique audit methodology or ‘‘style.’’
Our focus is on whether global networks enforce their unique global audit methodologies across their affiliates Ourexpectation is that they do and, therefore, we expect to observe greater comparability within cross-country client-pairs with auditorsfrom the same global network versus with auditors from different global networks Our expectation is based on two reasons.First, ‘‘each accounting firm must devise its own in-house working rules for the efficient and consistent implementation of
their audit methodologies Relatedly, global networks provide access to an expanded set of resources, such as training, experts,
in a global network is positively associated with audit fees This is consistent with expertise being embedded within globalnetwork audit methodologies, which then results in affiliates being able to charge more for this expertise Thus, we expectexpertise related to how to account for and audit specific transactions to transfer across a global network via global auditmethodologies, such that auditors from different affiliates from the same global network would audit similar transactions similarly.This should lead to greater financial reporting comparability across clients of affiliate firms from the same global network.Second, the networks have mechanisms and incentives to enforce the consistent application of their audit methodologies.For example, global networks have quality control procedures (e.g., inspections across affiliates, common training, technologythat monitors independence) Additionally, clients of non-Andersen U.S affiliates experienced negative abnormal returns ontwo key dates (i.e., January 10, 2002 and February 2, 2002) that revealed reputation-damaging news for the Andersen U.S
over to other affiliates, which suggests that the networks have reputation incentives to enforce the consistent application of their
Therefore, affiliate auditors from the same global network are more likely to make similar judgments for similartransactions and consistently identify or miss certain errors for similar transactions based upon guidance in their network’s auditmethodologies Our first hypothesis is stated in the alternative, as follows:
will have more comparable financial reporting than a pair of companies from different countries that are audited byaffiliates of different Big 6 global audit firm networks
While we expect the Big 6 global networks to enforce consistent audit methodologies across their affiliates, they may be
The Moderating Effect of Investor Protection
Prior studies have shown that country-specific investor protection environment affects financial reporting and audit quality
ante, it is unclear how investor protection affects the extent to which global networks implement global audit methodologies
In stronger investor protection regimes, regulators and other forces shape earnings quality, such that companies and theirlocal auditors consistently enforce accounting standards in accordance with the preferences of the local regime This leaves lessroom for the internal policies and rules of a particular global audit network to be observable in financial reporting outcomes
15
Nelson, Price, and Rountree (2008) find that the negative stock price reaction to the failure of Andersen U.S is attributable to confounding factors and
of Andersen U.S as reputation-damaging.
16
See footnote 3 for evidence that suggests that members have failed to comply with global audit methodologies.
Trang 6ownership by U.S institutional shareholders is positively associated with financial reporting comparability However, such a
monitoring by institutional owners plays less of a role in ‘‘developed markets where regulatory institutions provide strongincentives for firms to voluntarily commit to high-quality reporting.’’ This suggests that there is more room for global networkaudit methodologies to affect financial reporting in weak investor protection regimes, where there are likely fewer local auditingand accounting rules
However, auditors likely face greater repercussions for failing to follow their audit methodologies in stronger investor
protection becomes stricter, because they have significant reputational and equity capital that is at risk when investors are betterprotected Thus, in low-investor protection regimes, local affiliates of global networks may have little incentive to properlyexecute audit procedures, suggesting that auditors would be more likely to adhere to global network audit methodologies asinvestor protection increases Thus, the effect of investor protection on audit firm adherence to global audit methodologies isunclear Our second hypothesis is non-directional and stated as follows:
by affiliates of the same Big 6 global audit firm network does not vary with country-specific investor protection
The Moderating Effect of International Standards of Auditing (ISAs)
The ISAs are issued by the International Auditing and Assurance Standards Board (IAASB) As stated on the IAASBwebsite, the IAASB issues ‘‘high-quality international standards for auditing’’ to enhance ‘‘the quality and consistency of
better implement consistent audit methodologies across jurisdictions Specifically, if ISAs are adopted by local regulators, thenthe local auditor is encouraged by both the global network and the local jurisdiction to audit in accordance with ISAs Thisfollows because the audit methodologies of the global networks are based on ISAs However, if ISAs are not required by thelocal regulators, then auditors may focus on the requirements of the local jurisdiction and be less likely to follow theprescriptions of their network audit methodology This logic suggests that the effect of having an auditor from the same globalnetwork on cross-country financial reporting comparability would be higher when clients are from jurisdictions that requireISAs
However, and in contrast to the above, the effect of unique global network audit methodologies may be more significantacross jurisdictions that do not require ISAs When jurisdictions require ISAs, local audit firms may focus on jurisdiction-specific interpretations of ISAs If interpretations of ISAs are similar across jurisdictions, then there could be a reduction indifferences in audit execution between affiliates from different global networks In other words, there could be moreopportunity for a global network audit methodology to affect client financial reporting in jurisdictions that do not enforce aparticular set of auditing standards (e.g., ISAs)
Our last hypothesis is non-directional and stated as follows:
of the same Big 6 global audit firm network is no different when both countries have adopted ISAs compared towhen both countries have not adopted ISAs
III RESEARCH DESIGNMeasure of Comparability
similar client-pairs due to the consistency with which rules are applied We create pairs of two client-years that are fromdifferent countries, yet are in the same industry, have the same fiscal year-ends, and are in the same country-year quintile rank
Trang 7accounting policies and estimation errors (e.g., Jones 1991; Dechow and Dichev 2002) In other words, auditors can affect
comparability using differences in total accruals and differences in abnormal accruals:
measures within Appendix B
Next, because the prior two measures may capture the similarity of accounting outcomes, rather than the similarity ofaccounting systems (i.e., the mapping of transactions to accounting outcomes), we construct a measure capturing accounting
This regression estimates the relation between current accruals and operating cash flows using company-years that are in the
Second, for each company in a client-pair, we calculate predicted current accruals using the coefficients from its owncountry-industry-auditor level estimation, and predicted current accruals using the coefficients from the paired company’s
d
it and CACCd CFAj
it ¼ dCACCCFAj
it )
comparability.
19
20
See Barth et al (2012 , Appendix A) for details.
utilize the Fama-French 30 for industry classifications throughout the paper Inferences remain the same using two-digit SIC for industry classifications 22
Barth et al (2012) While De Franco, Kothari, and Verdi (2011) use returns to capture economic events, we focus on nonmarket-based economic events mainly because market efficiency is likely different across the jurisdictions in our sample In addition, returns capture changes in expected future cash flows that are not necessarily recognized in accounting outcomes Nonetheless, in additional analyses, we show that our results are robust to using market-based comparability measures.
Trang 8In the same way, we calculate two predicted current accruals of companyj, as follows.
Last, for each pair, we calculate the absolute value of the difference between the predicted accruals from the previous steps
above approach is that by estimating two predicted current accruals based on coefficients from two auditors, we hold the
For our last comparability measure, we examine the degree to which accruals for two clients covary over time, following
Thus, smaller values ofTACC_Cov indicate greater comparability between client-pairs
Primary Research Design
To formally test our hypotheses, we estimate the following equation using ordinary least squares (OLS) regressions:
consistent audit methodologies and, accordingly, increase the financial statement comparability of their clients across
controls for an earnings comparability regression Thus, we follow both papers and include control variables that capturevarious pair-specific characteristics, including differences and minimum of size, leverage, market-to-book, operating cashflows, losses, standard deviation of sales, standard deviation of cash flows, and sales growth
We control for the same accounting standard because studies have documented that the same and similar accounting
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cash flows.
Papke and Wooldridge (1996) , as a robustness check Inferences remain the same using this methodology (untabulated).
Trang 9IV SAMPLE SELECTION AND DESCRIPTIVE STATISTICSSample Selection
We begin with Compustat companies (Global Compustat for international companies) from 2003 through 2016, wherenecessary accounting information to calculate control variables is nonmissing We collect audit firm information from theCompustat North America database for U.S and Canadian companies and from Capital IQ for all other companies We thenretain company-years for clients of the Big 6 global audit networks with fiscal year-ends in March, June, September, andDecember, and from industries (Fama-French 30) with at least 50 company-years We delete companies with names containing
‘‘Holding’’ and ‘‘LLP’’ and also exclude financial institutions We also require at least ten company-years for a given industry-auditor We remove client-years that report fewer than eight quarters of quarterly accounting information during the
Panel A presents the sample selection details, and Panels B and C present the number of client-year observations in our study
by country and global network
We then create pairs of two clients that are from different countries, are in the same industry, and have the same fiscal ends Furthermore, we require the size (total assets) of two clients in a pair to be in the same quintile rank of size Quintile rank of
Descriptive Statistics and Univariate Results
Table 2 presents descriptive statistics and univariate results Continuous variables have been winsorized at the 1st and 99thpercentiles Out of 2,123,959 client-pairs in our sample, 20.2 percent of pairs are shared auditor pairs (i.e., pairs of clients that
8.5 percent, 7.7 percent, and 3.4 percent of total assets, respectively The average covariance of accruals between two pairs is 0.178 Per the last column of Table 2, shared auditor pairs have statistically smaller differences in accruals and higheraccruals covariance (or lower negative covariance) than nonshared auditor pairs, on average
client-V TEST RESULTSMain Results
25
We conduct analyses at the client-year-pair level However, one of our comparability measures (TACC_Cov) and some control variables (i.e., Loss_ prob_diff, Loss_prob_min, STD_sales_diff, STD_sales_min, STD_CFO_diff, STD_CFO_min, STD_sales_gr_diff, STD_sales_gr_min, and Ret_Cov) require quarterly data for construction Therefore, we remove client-years from the sample that do not have enough quarterly observations Also, when
measure is not influenced by either client being audited by more than one auditor.
26
at the 1 percent and 99 percent levels, winsorizing at the 2 percent and 98 percent levels, using robust regression (rreg in Stata), excluding observations with a Cook’s distance greater than 4/n, or excluding observations where the absolute value of studentized residuals is greater than 2.
and Zhang 2011 ) We acknowledge that there is no perfect way to match on size In addition to matching on size, we also control for size differences in all models.
28
For example, assume that there are four U.S companies, three Australian companies, and two Brazilian companies that are in the same industry and the same size quintile rank in a given fiscal year-end From these nine company-years from three countries, we can construct 26 cross-country pairs (4 3 3
i j ni3 njpairs, where i; j 2 1; 93 ½ .
29
Diff_CACC) are each an absolute value of the difference in accruals scaled by total assets between a client-pair, the above magnitudes represent the
covariation of accruals between a client-pair Thus, the 5.9 percent economic magnitude indicates that accruals’ covariation increases by 5.9 percent as
a result of sharing a global network auditor.
Trang 10TABLE 1Sample CompositionPanel A: Sample Selection Criteria
Total number of company-year observations in Compustat North America and Compustat Global from 2003 through
2016 that have necessary accounting information to calculate control variables
428,833Less observations whose auditor is not one of the Big 6 global network auditors.a (189,055)Less observations with fiscal year-ends not in March, June, September, or December (17,046)Less observations with ‘‘Holdings’’ and ‘‘LLP’’ in company name, in the finance industry, or in a given industry
with less than 50 observations
(22,352)Less observations in a given country and industry when the number of clients per each auditor is less than ten (13,403)Less observations that do not report quarterly accounting information for at least eight of the last 16 quarters (94,477)
Total number of cross-country pairs (same industry, fiscal year-ends, and quintile rank of size) without missing
i j n i 3 n j pairs where i; j 2 1; 93 ½ See the sample selection section for further details.
Panel B: The Number of Client-Years by Country
Country
Number ofCompany-Years
Trang 11have their own unique audit methodologies that they apply consistently across their global affiliates, which, in turn, results in amore comparable accruals structure and smaller differences in accruals.
The Shock of Andersen
Audit firms and clients choose to work together Thus, clients who prefer certain accounting treatments may match withaudit firms willing to agree with client preferences To provide stronger identification, we next use the failure of Andersen as aplausibly exogenous shock Andersen U.S surrendered its license to practice accounting in 2002 due to charges related toaccounting fraud at Enron Subsequently, Andersen’s foreign affiliates joined other global networks We use these switches toexamine whether the financial reporting of Andersen clients became more comparable to the clients of the global network theseclients joined after Andersen’s failure
Specifically, we use two approaches First, we use a sample of Andersen clients and clients of the global network that theAndersen clients joined after 2001 (i.e., Andersen clients have new auditors in 2002 due to the Andersen U.S failure) Wecompare the comparability of client-pairs of Andersen clients and the new global network clients before and after the event
the switch in auditors due to the failure of Andersen Because it could take time for the effect of the auditor switch to manifest,
we examine changes in comparability measures before and after the auditor switch based upon sample periods from [t1, tþ1]
Number ofCompany-Years
did not switch to EY Germany These clients could have chosen an audit firm other than EY Germany because of the accounting treatments provided by the new audit firm.
Trang 12Post is negative and significant in 21 of 24 estimations, which provides evidence that endogeneity due to client-auditormatching is not driving our results.
As a falsification test, we create cross-country client-pairs using a sample of Andersen clients and clients of the global networks
comparable to clients of global networks that they did not join As expected, we do not find evidence of increased comparability in
less comparable to clients of global networks that Andersen affiliates did not join upon the failure of Andersen U.S
Broader Switch Sample
equals 1 for years greater than or equal to the switch year, and 0 otherwise Table 5, Panel A presents the results We find
TABLE 2Descriptive Statistics and Univariate Analysis
Mean Diff
Shared_Auditor 2,123,959 0.202 0.000 0.40 429,348 1.000 1.000 1,694,611 0.000 0.000 1.000***Diff_TACC 2,123,959 0.085 0.064 0.08 429,348 0.083 0.063 1,694,611 0.085 0.063 0.002***TACC_min 2,123,959 0.093 0.079 0.07 429,348 0.093 0.081 1,694,611 0.093 0.076 0.000**Diff_DACC 1,952,383 0.077 0.056 0.07 394,775 0.076 0.055 1,557,608 0.077 0.055 0.001***DACC_min 1,952,383 0.045 0.031 0.07 394,775 0.045 0.032 1,557,608 0.045 0.030 0.000Diff_CACC 1,974,873 0.034 0.024 0.03 399,931 0.032 0.022 1,574,942 0.034 0.025 0.002***CACC_min 2,098,252 0.028 0.019 0.05 424,156 0.028 0.018 1,674,096 0.028 0.018 0.000***TACC_Cov 2,123,950 0.178 0.087 0.26 429,348 0.193 0.111 1,694,602 0.174 0.091 0.019***Ret_Cov 2,085,267 0.123 0.064 0.15 422,196 0.126 0.068 1,663,071 0.122 0.063 0.004***Size_diff 2,123,959 1.274 1.139 0.91 429,348 1.295 1.129 1,694,611 1.268 1.103 0.027***Size_min 2,123,959 5.191 4.941 1.92 429,348 5.340 5.112 1,694,611 5.153 4.909 0.187***Lev_diff 2,123,959 0.189 0.142 0.25 429,348 0.189 0.145 1,694,611 0.189 0.140 0.000Lev_min 2,123,959 0.112 0.059 0.13 429,348 0.118 0.074 1,694,611 0.111 0.063 0.007***MB_diff 2,123,959 7.274 1.502 34.95 429,348 7.557 1.476 1,694,611 7.202 1.402 0.355***MB_min 2,123,959 1.153 1.086 2.31 429,348 1.139 1.107 1,694,611 1.156 1.095 0.017***CFO_diff 2,123,959 0.126 0.086 0.14 429,348 0.124 0.084 1,694,611 0.126 0.083 0.002***CFO_min 2,123,959 0.004 0.032 0.15 429,348 0.002 0.036 1,694,611 0.004 0.032 0.002***Loss_prob_diff 2,123,959 0.289 0.200 0.27 429,348 0.279 0.188 1,694,611 0.291 0.201 0.012***Loss_prob_min 2,123,959 0.136 0.001 0.22 429,348 0.137 0.002 1,694,611 0.136 0.001 0.001STD_sales_diff 2,123,959 132.460 6.057 508.58 429,348 152.125 6.891 1,694,611 127.478 5.778 24.647***STD_sales_min 2,123,959 27.571 3.674 67.39 429,348 31.018 4.702 1,694,611 26.697 3.475 4.321***STD_CFO_diff 2,123,959 156.703 6.668 562.94 429,348 184.721 9.291 1,694,611 149.605 8.382 35.116***STD_CFO_min 2,123,959 38.448 5.055 93.18 429,348 43.634 5.927 1,694,611 37.134 4.490 6.500***STD_sales_gr_diff 2,123,959 0.899 0.130 3.86 429,348 0.902 0.125 1,694,611 0.898 0.129 0.004STD_sales_gr_min 2,123,959 0.144 0.112 0.13 429,348 0.140 0.110 1,694,611 0.144 0.113 0.004***Same_Standard 2,123,959 0.393 0.047 0.49 429,348 0.416 0.078 1,694,611 0.388 0.041 0.028***
**, *** Denote significance at the 5 percent and 1 percent levels, respectively, based on two-tailed tests.
Germany and clients of BDO, Deloitte, Grant Thornton, KPMG, and PwC in other countries.
35
The downside of using this sample is that voluntary auditor switches suffer from selection bias.
Trang 13TABLE 3Comparability and Shared Auditor
*, **, *** Denote significance at the 10 percent, 5 percent, and 1 percent levels, respectively, based on two-tailed tests.
Table 3 presents regression results using financial statement comparability measures as dependent variables The four dependent variables are the absolute value of the difference in total accruals (Diff_TACC), the absolute value of the difference in discretionary accruals (Diff_DACC), the average of absolute differences in predicted current accruals (Diff_CACC), and negative co-movement of total accruals for the prior 16-quarter period (TACC_Cov),
t-statistics based on robust standard errors clustered at the client-pair level are reported in parentheses.
Detailed definitions of variables are in Appendix A.