Trade-offs in the relationship between competition and audit quality

被引:3
|
作者
Ho, Nam [1 ]
机构
[1] Brock Univ, Goodman Sch Business, St Catharines, ON, Canada
基金
美国安德鲁·梅隆基金会;
关键词
Audit quality; Competition; Market concentration; Market structure; MARKET CONCENTRATION; MANAGEMENT; RISK;
D O I
10.1108/MAJ-11-2020-2910
中图分类号
F8 [财政、金融];
学科分类号
0202 ;
摘要
Purpose Fears over public accounting becoming increasingly concentrated have inspired several attempts to study the relationship between competition and audit quality. These studies have yielded conflicting results without a clear reason as to why. This paper aims to propose a new approach and empirically demonstrate a non-monotonic association between competition and audit quality. Design/methodology/approach Using metropolitan statistical area level data from the USA over the period of 2000-2014, the author shows that the effect that changes in the competition will have on audit quality depends upon the current competitive state of the market. Findings Audit quality is at its highest level when competition is neither too high nor too low. In addition, the point of inflection at which competition turns from being helpful to harmful is influenced by the saturation of the Big 4 auditors in the market. Practical implications These findings can help explain the mixed results of the literature and provide insight into the role that regulators can play in modulating competition. Originality/value This is the first paper to document a non-monotonic relationship between competition and audit quality. By introducing and exploring the validity of a non-monotonic component in the audit quality equation, the authors can better determine, which competitive structures generate desired levels of audit quality.
引用
收藏
页码:39 / 68
页数:30
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