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Auditor Lobbying on Accounting Standards

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  • Allen, Abigail
  • Ramanna, Karthik
  • Roychowdhury, Sugata

Abstract

We examine how Big N auditors’ changing incentives impact their comment-letter lobbying on U.S. GAAP over the first thirty-four years of the FASB (1973–2006). In particular, we focus on the influence of auditors’ lobbying incentives arising from two basic factors: managing expected litigation and regulatory costs and catering to clients’ preferences for flexibility in GAAP. We find evidence that auditor lobbying is driven by prevailing standards of litigation and regulatory scrutiny, but we find no evidence that catering to clients’ preferences for flexibility in GAAP drives auditor lobbying. Broadly, our paper offers the first large-sample descriptive analysis of the role of Big N auditors in the accounting standard-setting process.

Suggested Citation

  • Allen, Abigail & Ramanna, Karthik & Roychowdhury, Sugata, 2018. "Auditor Lobbying on Accounting Standards," Journal of Law, Finance, and Accounting, now publishers, vol. 3(2), pages 291-331, December.
    • Handle: RePEc:now:jnllfa:108.00000027
    DOI: 10.1561/108.00000027
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    Cited by:

    1. Abigail Allen & Reining C. Petacchi, 2023. "Preparer Opposition and Strategic Implementation of Governmental Accounting Standards: Evidence from Public Pension Accounting Reform," Management Science, INFORMS, vol. 69(7), pages 4259-4282, July.
    2. Jonas Heese, 2022. "Does Industry Employment of Active Regulators Weaken Oversight?," Management Science, INFORMS, vol. 68(12), pages 9198-9218, December.

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