Does Credible Auditing Add Value?
This article studies the impact of the year 2002 audit failures on the auditorsâ€™ clientsâ€™ stock prices. Specifically, we examine the Big 5â€™s clients stock market impact surrounding various dates on which one of the Big 5â€™s audit procedures and independence were under scrutiny: Omnicom, Merck, WorldCom, Qwest, Xerox, Bristol Meyers, Duke Energy, El Paso and AOL events. In general, on failures involving Arthur Andersen, Andersenâ€™s former clientâ€™s and clients of the auditor in place experienced statistically negative market reactions. On events involving other Big 4, clients didnâ€™t experience statistically negative market reactions. The SEC order to CEOâ€™s certification causes volatility but not statistically negative market reactions.
Volume (Year): 3 (2006)
Issue (Month): 2 (July)
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