Audit quality and auditor reputation
Subtitle: evidence from Japan
By: Douglas J. Skinner, Suraj Srinivasan
Contributors: Srinivasan, Suraj; Harvard Business School
Series: Working paper / Harvard Business School -- 10-088; Working paper (Harvard Business School) -- 10-088.
Publisher: Harvard Business School
Published: 2010
Place of publication: [Boston]
Language: eng
Number of pages: 55
Description: We study events surrounding ChuoAoyama's failed audit of Kanebo, a large Japanese cosmetics company whose management engaged in a massive accounting fraud. ChuoAoyama was PwC's Japanese affiliate and one of Japan's "Big Four" audit firms. In May 2006, the Japanese Financial Services Agency (FSA) suspended ChuoAoyama's operations for two months as punishment for its role in the accounting fraud at Kanebo. This action was unprecedented, and followed a sequence of events that seriously damaged ChuoAoyama's reputation for audit quality. We use these events to provide evidence on the importance of auditors' reputation for audit quality in a setting where litigation plays essentially no role. We find that ChuoAoyama's audit clients switched away from the firm as questions about its audit quality became more pronounced but before it was clear that the firm would be wound up, consistent with the importance of auditors' reputation for delivering quality.
Notes: "March 2010"--Publisher's website.

"February 2010; original draft, January 2009"--added t.p.

Includes bibliographical references.