The auditing oligopoly and lobbying on accounting standards
By: Abigail Allen, Karthik Ramanna, Sugata Roychowdhury
Contributors: Ramanna, Karthik; Roychowdhury, Sugata; Harvard Business School
Edition: Revised edition
Series: Working paper / Harvard Business School -- 13-054; Working paper (Harvard Business School) -- 13-054
Publisher: Harvard Business School
Published: 2013
Place of publication: Boston]
Language: eng
Number of pages: 56
Description: We examine how the tightening of the U.S. auditing oligopoly over the last twenty-five years--from the Big 8 to the Big 6, the Big 5, and, then, the Big 4--has affected the incentives of the Big N, as manifest in their lobbying preferences on accounting standards. We find, as the oligopoly has tightened, Big N auditors are more likely to express concerns about decreased "reliability" in FASB-proposed accounting standards (relative to an independent benchmark); this finding is robust to controls for various alternative explanations. The results are consistent with the Big N auditors facing greater political and litigation costs attributable to their increased visibility from tightening oligopoly and with decreased competitive pressure among the Big N to satisfy client preferences (who, relative to auditors, favor accounting flexibility over reliability). The results are inconsistent with the claim that the Big N increasingly consider themselves "too big to fail" as the audit oligopoly tightens.
Notes: "December 2012. (Revised August 2013.)"--Publisher's Web site.

Includes bibliographical references (pages 38-40).