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Auditor Lobbying on Accounting Standards

Author

Listed:
  • Abigail M. Allen

    (Harvard Business School, Accounting and Management Unit)

  • Karthik Ramanna

    (Harvard Business School, Accounting and Management Unit)

  • Sugata Roychowdhury

    (Boston College)

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). We examine the influence of auditors' lobbying incentives arising from three basic factors: managing expected litigation and regulatory costs; catering to clients' preferences for flexibility in GAAP; and being conceptually aligned with the FASB, particularly on the use of fair values in accounting. We find evidence that auditor lobbying is driven by prevailing standards of litigation and regulatory scrutiny and by support for fair-value accounting. 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

  • Abigail M. Allen & Karthik Ramanna & Sugata Roychowdhury, 2014. "Auditor Lobbying on Accounting Standards," Harvard Business School Working Papers 15-055, Harvard Business School.
    • Handle: RePEc:hbs:wpaper:15-055
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    Citations

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    Cited by:

    1. Karen Handley & Elaine Evans & Sue Wright, 2020. "Understanding participation in accounting standard‐setting: the case of AASB ED 192 Revised Differential Reporting Framework," Accounting and Finance, Accounting and Finance Association of Australia and New Zealand, vol. 60(4), pages 3621-3645, December.
    2. Isabelle Fabioux, 2016. "Le processus de normalisation de l’audit : état de l’art et voies de recherches futures," Post-Print hal-01902563, HAL.
    3. Knechel, W. Robert & Park, Hyun Jong, 2022. "Audit firm political connections and PCAOB inspection reports," Accounting, Organizations and Society, Elsevier, vol. 100(C).

    More about this item

    Keywords

    Auditors; FASB; GAAP; lobbying;
    All these keywords.

    JEL classification:

    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting
    • M42 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Auditing
    • M48 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Government Policy and Regulation

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