IDEAS home Printed from https://ideas.repec.org/a/bla/acctfi/v50y2010i4p743-766.html
   My bibliography  Save this article

The value of Big 4 audits in Australia

Author

Listed:
  • Masoud Azizkhani
  • Gary S. Monroe
  • Greg Shailer

Abstract

Research suggests that equity markets value Big N audits over non-Big N audits. Explanations include the information quality hypothesis, whereby Big N auditors increase information quality, and the insurance hypothesis, whereby investors value the deeper pockets of Big N auditors. Using client firms'"ex ante" cost of capital as the dependent variable, we investigate whether capital market participants differentially value Big 4 versus non-Big 4 audits in Australia and whether the value of Big 4 audits in Australia changed as a result of the audit failures of 2001-2002. We find that Big 4 audits reduce the "ex ante" cost of equity capital until 2001, but not after 2001. We cannot dismiss the insurance hypothesis for the persistence of the loss beyond 2003 because of the establishment of liability caps, but the demise of the Big 4 audit value for 2001-2003 is consistent with the information quality hypothesis and does not support the insurance hypothesis. Copyright (c) 2010 The Authors. Accounting and Finance (c) 2010 AFAANZ.

Suggested Citation

  • Masoud Azizkhani & Gary S. Monroe & Greg Shailer, 2010. "The value of Big 4 audits in Australia," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 50(4), pages 743-766.
  • Handle: RePEc:bla:acctfi:v:50:y:2010:i:4:p:743-766
    as

    Download full text from publisher

    File URL: http://www.blackwell-synergy.com/doi/abs/10.1111/j.1467-629X.2010.00346.x
    File Function: link to full text
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Joshy,Jacob & Desai, Naman & Agarwalla, Sobhesh Kumar, 2015. "Are Big 4 Audit Fee Premiums Always Related to Superior Audit Quality? Evidence from India’s Unique Audit Market," IIMA Working Papers WP2015-03-10, Indian Institute of Management Ahmedabad, Research and Publication Department.
    2. repec:eee:riibaf:v:42:y:2017:i:c:p:689-709 is not listed on IDEAS
    3. Munisi, Gibson & Randøy, Trond, 2013. "Corporate governance and company performance across Sub-Saharan African countries," Journal of Economics and Business, Elsevier, vol. 70(C), pages 92-110.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bla:acctfi:v:50:y:2010:i:4:p:743-766. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum). General contact details of provider: http://edirc.repec.org/data/aaanzea.html .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.